Preferred Stock Dividends

question 30

Multiple Choice

Preferred stock dividends:

• A) have preference over bond interest payments.
• B) are guaranteed to be paid at least annually.
• C) are excluded from the taxable income of their recipients.
• D) have priority over common stock dividends.

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Definitions:

Leverage

The use of borrowed capital or financial instruments to increase the potential return of an investment.

Equity Financing

The process by which a company raises capital through the sale of shares.

Depreciation

A method of allocating the cost of a tangible asset over its useful life.

Noncash Expense

Expenses recorded on an income statement that do not involve a direct cash outflow, such as depreciation or amortization.