A Company Issued 8% Preferred Stock with a $100 Par

question 25

Multiple Choice

A company issued 8% preferred stock with a $100 par value.This means:

• A)Preferred stockholders are entitled to 8% of the annual net income.
• B)Only 8% of total contributed capital can be preferred stock.
• C)Preferred stockholders are guaranteed a dividend.
• D)The potential dividend to preferred stockholders is $8 per share per year.

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Definitions:

Equity-Financed

A method of raising capital whereby a company issues new shares of stock and receives fresh capital in return but does not incur debt.

Value Per Share

The amount of money that would be received for each share of stock if all of a company’s assets were sold at their exact book value.

Incremental Value

The additional value created by undertaking a particular action, project, or investment, compared to not doing so.

Shares Outstanding

The total number of shares of a company that are currently owned by shareholders, including share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders.