When Preferred Stock Is Converted to Common Stock

question 16

Multiple Choice

When preferred stock is converted to common stock

• A) The debt-to-equity ratio decreases.
• B) The debt-to-equity ratio increases.
• C) The debt-to-equity ratio is unchanged.
• D) A gain or loss is reported in earnings for the difference between the fair value of the common stock and the book value of the preferred stock that was converted.

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Definitions:

Apical Dominance

A growth pattern in plants where the main, central stem grows more vigorously than the other side stems, which are suppressed.

Cytokinin

Plant hormone that promotes cell division in shoot apical meristem and cell differentiation in root apical meristem. Often opposes auxin’s effects.

Fleshy Fruits

Types of fruits that have a soft, edible part developed from the ovary of a flower, typically containing seeds.