If Class a Preferred Shares Provide Only for a Cumulative

question 60

Multiple Choice

If Class A preferred shares provide only for a cumulative dividend of $3 per share, what will be the consequence on liquidation?

• A) Class A Preferred will receive $3 per share more than common shares.
• B) Class A Preferred will receive 103% of common shares.
• C) Class A Preferred will share equally with common shares.
• D) Class A Preferred will be subordinated to the rights of common shares.

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Definitions:

Acid-test Ratio

A liquidity ratio that measures a company’s ability to pay off its current liabilities with quick assets, excluding inventory.

Accounts Receivable Turnover

A financial ratio that measures the efficiency of a company in collecting its receivables or the credit it has extended to customers.

Inventory Turnover

A ratio indicating how many times a company's inventory is sold and replaced over a specific period.

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term financial health and operational efficiency of a business.