Why Do Investors in New Ventures Prefer to Take Preferred

question 26

Multiple Choice

Why do investors in new ventures prefer to take preferred stock in a venture instead of common stock?

• A) Because preferred shareholders get paid dividends before common shareholders
• B) Because preferred stock is much cheaper
• C) Because preferred stock is always worth double common stock
• D) Because preferred stock is easier to sell

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Definitions:

Human Capital

The improvement in labor created by education and knowledge that is embodied in the workforce.

College Degree

A certification awarded by colleges or universities to signify that a student has completed a specified course of study, typically representing a higher level of education and expertise.

Stock

In finance, stock represents ownership shares in a company, allowing investors to claim on the company's assets and earnings proportionate to the amount of stock they own.

Economy

A system of production, distribution, and consumption of goods and services among a group of people.