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:

Secondary Reserves

Liquid assets held by financial institutions that are not used for primary obligations but can be quickly converted to cash for emergency needs.

U.S. Government Securities

Financial instruments issued by the United States Department of the Treasury to finance federal government's expenditures.

Vault Cash

Currency and coins held by a bank in its vault and used to satisfy the bank's reserve requirements.

Securities

Financial instruments representing ownership (stocks), a creditor relationship with a government or corporation (bonds), or other rights to ownership or profit.