Assume a Company's Preferred Stock Is Cumulative with a Call

question 37

Multiple Choice

Assume a company's preferred stock is cumulative with a call provision and has dividends in arrears.The amount of stockholders' equity allocated to preferred stockholders is equal to the number of shares outstanding times the

• A)sum of the par value per share plus any liquidation premium per share,plus the sum of any preferred dividends in arrears,plus the current year's dividend requirement,but only if dividends have been declared.
• B)sum of the par value per share,plus any liquidation premium per share,plus the sum of any preferred dividends in arrears,plus the current year's dividend requirement,regardless of whether dividends have been declared.
• C)call price plus the sum of any preferred dividends in arrears,plus the current year's dividend requirement,but only if dividends have been declared.
• D)call price plus the sum of any preferred dividends in arrears,plus the current year's dividend requirement,regardless of whether dividends have been declared.

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Definitions:

Acid-Test Ratio

A financial metric that measures a company's ability to pay off its current liabilities with its most liquid assets, excluding inventory.

Current Liabilities

Short-term financial obligations that are due within one year or within a company's operating cycle, whichever is longer.

Accounts Receivable Turnover

A financial ratio that measures how efficiently a company collects debts from its customers.

Acid-Test Ratio

A stringent indicator that measures a company's ability to cover its short-term liabilities with its most liquid assets, excluding inventory.