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Both Common and Preferred Stock Carry the Same Degree of Investment

question 267

True/False

Both common and preferred stock carry the same degree of investment risk for the stockholder.


Definitions:

Debt-Equity Ratio

A gauge that marks the relative positions of debt and equity in the funding of a company's assets.

Dividend Payout Ratio

The portion of earnings a company pays to its shareholders in the form of dividends, expressed as a percentage of the company's total net income.

Retention Ratio

The proportion of net income that is retained by a corporation rather than distributed to its shareholders as dividends.

Retained Earnings

The portion of a company's profits not distributed to shareholders as dividends and retained for reinvestment or debt repayment.

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