Which of the Following Is Not True

question 71

Multiple Choice

Which of the following is not true?

• A)Owners of preferred stock have a claim on the assets of a firm that is senior to the claim of common shareholders.
• B)Preferred shares carry special rights.
• C)The senior status and special rights may induce certain investors to purchase preferred shares of a firm, even though they would be unwilling to purchase common shares of the same firm.
• D)The senior status and special rights decrease the risks of preferred shareholders relative to common shareholders.
• E)Jurisdictional laws dictate the rights and obligations of the issuing firm and of the investor in the preferred shares.

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Definitions:

Straight-Line Method

A depreciation technique that allocates an equal amount of depreciation to each year of the asset's useful life.

Salvage Value

The predicted value of an asset on the market at the close of its effective life.

Depreciation Expense

The methodical distribution of a physical asset's expense over its lifespan, indicative of the asset's usage or deterioration.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life as an expense, reflecting wear and tear or obsolescence.