Fixed Dividend Preferred Stock Is a Good Candidate for Marketable

question 16

True/False

Fixed dividend preferred stock is a good candidate for marketable security holdings designed to provide liquidity because 70 percent of the dividends are excludable from taxable income, hence the preferred would provide a relatively high after-tax rate of return.

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Definitions:

Liquidity Position

A measure of a company or individual's ability to quickly convert assets into cash to meet financial obligations.

Efficiently

The ability to achieve a goal or perform a task with the least waste of time and effort; effectiveness and efficiency combined.

Average Payables Period

A financial metric that measures the average number of days a company takes to pay its suppliers; it is an indicator of the company's efficiency in managing its accounts payable.

Credit Term

The conditions under which credit will be extended to a borrower, including repayment time frame and interest rate.