Which of the Following Is NOT True About Preferred Stock

question 104

Multiple Choice

Which of the following is NOT true about preferred stock?

• A) 70% of dividends are nontaxable to other corporations that hold preferred stock.
• B) The after-tax cost is higher than debt with the same yield.
• C) Dividends are legal obligations of the firm.
• D) Preferred stocks are typically cumulative with respect to dividends.

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Definitions:

Return on Sales

A financial ratio that calculates how efficiently a company is at generating operating profit from its revenue.

Return on Assets

Return on Assets (ROA) is a financial ratio that measures the profitability of a company relative to its total assets, indicating how efficient a company is at using its assets to generate profits.

Return on Inventory

A financial metric used to assess how effectively a company generates profits from its inventory investments.

Return on Stockholders' Equity

A financial ratio that measures the profitability of a corporation in relation to stockholders' equity, indicating how effectively equity is used to generate profits.