How Is the Stated Value of a Preferred Stock Utilized

question 76

Essay

How is the stated value of a preferred stock utilized?

---

Definitions:

Ignores Salvage Value

This term refers to the accounting practice where the potential residual value of an asset at the end of its useful life is not considered in depreciation calculations.

Straight-line Method

A method of calculating depreciation by evenly spreading the cost of an asset over its expected useful life.

Double Declining-balance

An accelerated depreciation method that counts the expense twice as fast as the straight-line method, reducing the value of an asset more quickly.

Net Income

The amount of profit left after all expenses, taxes, and costs are subtracted from a company’s total revenue; synonymous with net profit.