Which of the Following Is a Disadvantage of Issuing Preferred

question 68

Multiple Choice

Which of the following is a disadvantage of issuing preferred stock from the common stockholders' perspective?

• A) There is a seniority of preferred stockholder's claim over common stockholders.
• B) The preferred stockholders have superior voting rights in the selection of board of directors.
• C) The preferred stockholders are always paid a higher proportion of dividend payments.
• D) Issuance of preferred stocks will result in a higher risk, to the disadvantage of common stockholders.

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Definitions:

Equity Holders

Investors who own shares or stock in a company, giving them ownership interest and typically voting rights in the corporation.

Start-up Firms

A newly established company that is in the phase of developing and bringing to market a new product or service.

Going Public

The process by which a privately held company offers its shares to the public for the first time, through an initial public offering (IPO).

Market Value

The present rate at which a service or asset is available for sale or purchase in the open market.