If a Company Retires Preferred Stock, Which of the Following

question 144

Multiple Choice

If a company retires preferred stock, which of the following is TRUE?

• A) Total equity will decrease.
• B) Total equity will increase.
• C) The company can record a gain or loss on retirement of stock.
• D) The number of outstanding shares will go up.

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Definitions:

Short-run Equilibrium

A state in a market where supply equals demand within a short-term period, leading to a stable price level temporarily.

Monopolistically Competitive

In a monopolistically competitive market, firms sell products that are not perfect substitutes for each other, leading to some degree of market power but with free entry and exit in the long run.

Positive Profit

A financial gain that occurs when the revenues from business activities exceed the expenses, costs, and taxes needed to sustain the operation.

Tangent

A straight line that touches a curve at a single point without crossing it at that point.