Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Preferred Stock

Financial Accounting

12. Stockholders' Equity

Preferred Stock

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Multiple Choice

Which of the following statements about preferred stock is true?

Dividends on preferred stock are always guaranteed and must be paid every year.

Preferred stockholders typically have voting rights equal to those of common stockholders.

Preferred stock cannot be converted into common stock under any circumstances.

Preferred stockholders generally have priority over common stockholders in receiving dividends.

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Verified step by step guidance

Step 1: Understand the concept of preferred stock. Preferred stock is a type of equity security that typically provides shareholders with priority over common stockholders in receiving dividends and assets during liquidation.

Step 2: Analyze the statement 'Dividends on preferred stock are always guaranteed and must be paid every year.' This is incorrect because dividends on preferred stock are not always guaranteed; they depend on the company's profitability and dividend policy.

Step 3: Evaluate the statement 'Preferred stockholders typically have voting rights equal to those of common stockholders.' This is incorrect because preferred stockholders generally do not have voting rights, unlike common stockholders.

Step 4: Assess the statement 'Preferred stock cannot be converted into common stock under any circumstances.' This is incorrect because some preferred stocks are convertible, allowing shareholders to exchange them for common stock under specific conditions.

Step 5: Confirm the correct statement: 'Preferred stockholders generally have priority over common stockholders in receiving dividends.' This is true because preferred stockholders are entitled to receive dividends before any dividends are distributed to common stockholders.