Which Statement Is TRUE Regarding Preferred Stock

question 148

Multiple Choice

Which statement is TRUE regarding preferred stock?

• A)The dividends paid on preferred stock are deductible on the corporation's tax return.
• B)The company has an obligation to repay the preferred stock.
• C)The obligation to pay dividends occurs only after the board of directors declares the dividends.
• D)All of the above are true.

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Definitions:

Dividends

Payments made by a corporation to its shareholders, usually in the form of cash or additional shares, from its profits.

Depreciation

This is the systematic allocation of the cost of a tangible asset over its useful life. It reflects the consumption of the asset over time.

Tax Bill

A tax bill is an official statement from a governmental authority specifying the amount of taxes owed by an individual or organization for a certain period.

Net Cash Flow

The amount of cash that is generated or lost by a business in a given period, after accounting for all cash inflows and outflows related to operational, investing, and financing activities.