What Is the Significance of the Term "Preferred" in Reference

question 31

Multiple Choice

What is the significance of the term "preferred" in reference to preferred stock?

• A) It is viewed to generally be a better investment than common stock.
• B) Preferred stockholders usually have better voting rights than common stockholders.
• C) Preferred stockholders receive preference over creditors of the corporation in the event of liquidation.
• D) Preferred stockholders receive certain preferences over common stockholders with respect to dividends or with respect to assets in the event of liquidation.
• E) Only shareholders owning a certain minimum amount of common stock are entitled to purchase preferred stock.

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Definitions:

Liabilities

Liabilities refer to the financial obligations or debts that an entity owes to others, which must be settled through the transfer of assets or providing services.

Revenue

The income generated from normal business operations, calculated as the total sales of goods or services.

Net Income

The total earnings of a company after deducting all expenses, taxes, and costs from its total revenue, indicating the financial health of a company.