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

Dividends and Dividend Preferences

Financial Accounting

12. Stockholders' Equity

Dividends and Dividend Preferences

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Multiple Choice

Preferred stock usually carries a preference for dividends, meaning that:

Preferred shareholders are guaranteed a fixed dividend payment every year, regardless of company profits.

Preferred shareholders must receive their dividends before any dividends are paid to common shareholders.

Preferred shareholders receive higher dividend rates than common shareholders every year.

Preferred shareholders can vote on dividend policies at annual meetings.

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Verified step by step guidance

Understand the concept of preferred stock: Preferred stock is a type of equity security that typically provides shareholders with a fixed dividend and priority over common shareholders in receiving dividends.

Analyze the statement 'Preferred shareholders are guaranteed a fixed dividend payment every year, regardless of company profits': This is incorrect because dividends are typically paid out of profits, and if the company does not generate sufficient profits, it may not pay dividends, even to preferred shareholders.

Evaluate the statement 'Preferred shareholders must receive their dividends before any dividends are paid to common shareholders': This is correct because preferred shareholders have a priority claim on dividends before common shareholders receive any payments.

Review the statement 'Preferred shareholders receive higher dividend rates than common shareholders every year': This is not necessarily true, as the dividend rate for preferred stock is fixed and may not always be higher than the dividends paid to common shareholders.

Assess the statement 'Preferred shareholders can vote on dividend policies at annual meetings': This is incorrect because preferred shareholders typically do not have voting rights, unlike common shareholders.