Cost of Preferred Stock to a Firm Must Be Adjusted

question 55

True/False

cost of preferred stock to a firm must be adjusted to an after-tax figure because 70% of dividends received by a corporation may be excluded from the receiving corporation's taxable income.

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Definitions:

Indirect Method

A way of calculating cash flows from operating activities in the cash flow statement by adjusting net income for changes in non-cash accounts.

Net Decrease

A reduction in the quantity or value of something, calculated by subtracting the final figure from the initial figure.

Inventories

Quantities of goods that are held by a company for the purpose of resale or production.

Indirect Method

A way of preparing the cash flow statement where net income is adjusted for non-cash transactions and changes in working capital to arrive at operating cash flow.