Because Preferred Stock Is a Form of Ownership and Has

question 145

True/False

Because preferred stock is a form of ownership and has no maturity date, its claims on income and assets are secondary to those of the firm's creditors.

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Definitions:

Present Value

The current value of a future sum of money or stream of cash flows, given a specified rate of return.

Economic Rent

It is the payment to an owner or factor of production in excess of the costs needed to bring that factor into production. In other words, it's the extra income earned from a resource without investing in additional effort or cost.

Net Productivity

The actual output after subtracting the inputs used in the production process, indicating the efficiency of production.

Capitalization

The total market value of a company's outstanding shares, representing the investment community's perception of its worth.