If a Company Has Both Common and Preferred Shares Outstanding

question 71

Multiple Choice

If a company has both common and preferred shares outstanding and wishes to calculate book value per share,

• A)net assets must be divided by the total number of both classes of stock.
• B)net assets,less the redemption value of the preferred stock,must be divided by the number of shares of common stock outstanding.
• C)stockholders' equity must be divided by the total number of both classes of stock.
• D)stockholders' equity,less the cost of treasury shares held,must be divided by the number of common shares outstanding.

Assess the financial outcomes of adding or dropping a product line based on relevant and irrelevant costs.

Understand the concept of differential cost and how it applies to business decisions.

Analyze the financial advantage (disadvantage) of discontinuing a product, service, or segment.

Understand the concept of outsourcing and make-or-buy decisions.

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Definitions:

Competitive Advantage

The unique advantage a company has over its competitors, allowing it to generate greater sales or margins and/or retain more customers.

Technological Innovations

New or improved technological products or processes that significantly advance the state of the art, within any field of technology.

Faithful Representation

A fundamental qualitative characteristic in accounting that ensures financial information accurately reflects an entity's transactions and events in a way that is complete, neutral, and free from error.

Economic Events

Actions or occurrences that have a direct economic impact on the financial position of a business, influencing its assets, liabilities, and equity.