Which of the Following Does NOT Correctly Complete This Sentence

question 155

Multiple Choice

Which of the following does NOT correctly complete this sentence: Preferred stock is much like debt in that ______________.

• A) Both frequently carry credit ratings.
• B) Both can be repaid using a sinking fund.
• C) Both receive a stated payment from the corporation during the year.
• D) Both payments are subject to the same tax treatment for the issuing firm.
• E) The holders of both get a stated payment in the event of a liquidation.

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Definitions:

Payee

The party in a financial transaction who receives payment.

Liquidation Value

The estimated total value of a company's assets if it were to be liquidated immediately.

Aging Method

An accounting technique used to estimate the amount of uncollectable accounts receivable by categorizing outstanding invoices based on the length of time they have been due.

Dishonored

Refers to a financial instrument, such as a check or promissory note, that is not accepted or paid at maturity due to insufficient funds or other reasons.