Which of the Following Statements Concerning Preferred Stock Is Correct

question 40

Multiple Choice

Which of the following statements concerning preferred stock is correct?

• A) Preferred stock generally is more costly to the firm than common stock.
• B) Most issues of preferred stock have a cumulative feature.
• C) Preferred dividend payments are tax-deductible.
• D) Preferred stock is a riskier form of capital to the firm than bonds.

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Definitions:

Profit-maximizing

The process or strategy by which a firm determines the price and output level that returns the greatest profit.

Output

The total amount of goods or services produced by a firm, industry, or economy in a given period.

Marginal Wage Cost

The additional cost incurred by hiring an extra unit of labor, essentially the change in total wage cost from hiring one more employee.

Monopsonistic Labor Market

A market situation in which there is only one buyer (employer) for many sellers (workers), allowing the buyer to exert considerable control over wages and employment conditions.