Why Would an Investor Favor a Common Share Over a Preferred

question 110

Multiple Choice

Why would an investor favor a common share over a preferred share?

• A)To obtain a bigger potential capital gain.
• B)To obtain repayment of the face value at maturity.
• C)To obtain a fixed dividend.
• D)To obtain a fixed coupon payment.
• E)To obtain a variable dividend

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Definitions:

Noncash Assets

Assets owned by a business that are not cash, including property, equipment, and intellectual property.

Capital Deficiencies

Capital deficiencies occur when a company's financial resources and assets are not sufficient to cover its liabilities and debts.

Income Ratios

Financial metrics that compare various forms of income to another number on the company's financial statement, often used to assess financial health and profitability.

Capital Balances

The amount of money that owners have invested in a business, reflected in the equity section of the balance sheet.