Which of the Following Statements About Preferred Stock Is True

question 35

Multiple Choice

Which of the following statements about preferred stock is true?

• A)Unlike dividends paid on common stock, dividends paid on preferred stock are a tax-deductible expense.
• B)Unpaid dividends on preferred stock are a debt of the corporation.
• C)If preferred dividends are non-cumulative, then preferred dividends not paid in a particular year will be carried forward to the next year.
• D)There is no difference in the voting rights of preferred and common stockholders.
• E)None of the above.

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Definitions:

Weighted Average Cost

The total cost of goods available for sale divided by the number of goods available for sale, giving each item a weight proportional to its cost.

Cost of Equity

The return a firm theoretically pays to its equity investors, i.e., shareholders, to compensate them for the risk of investing in the company.

Pre-tax Cost

The cost of an investment or expense before the application of taxes, representing the gross expense.

Market Price

The rate at present for the purchase or sale of a service or asset.