Which of the Following Is True with Regard to Preferred

question 304

Multiple Choice

Which of the following is true with regard to preferred stock?

• A) Dividends must be paid each year on preferred stock.
• B) The growth potential of preferred stock is limited due to its fixed dividend.
• C) Preferred stock is more risky than common stock.
• D) The usual par value of a preferred share is $1.
• E) It cannot be callable.

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Definitions:

Average Collection Period

The average number of days it takes for a business to receive payments owed by its customers for sales made on credit.

Charge Customer

The process of recording or billing a customer for goods sold or services rendered, reflecting an obligation for payment.

Acid Test Ratio

A financial metric that measures a company's ability to pay off its current liabilities with quick assets, such as cash, marketable securities, and accounts receivable, without selling inventory.

Acid Test Ratio

A financial metric that measures a company's ability to pay off its current liabilities with its quick assets (cash, marketable securities, and receivables).