The Name Preferred Stock Is in Reference to the Fact

question 67

Multiple Choice

The name preferred stock is in reference to the fact that:

• A)it is a type of corporate debt.
• B)it is treated like debt for tax purposes.
• C)preferred dividends must be paid in full before any additional interest may be paid.
• D)preferred dividends must be paid in full before any common stock dividends can be paid.
• E)fixed income traders prefer it to bonds.

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Definitions:

Average Tax Rate

The fraction of total income that is paid in taxes, calculated by dividing the total tax amount by the total income.

Dollar Tax Liability

The amount of tax owed to the government, calculated in dollars, based on income, sales, imports, or other taxable activities.

Progressive Tax

A tax system in which the tax rate increases as the taxable amount increases, placing a larger burden on those who have higher earnings.

Average Tax Rate

The proportion of the total taxable income paid in taxes, calculated by dividing the total tax amount by the total income.