Multiple Choice
Preferred stock carries priority over common stock:
26
views
12. Stockholders' Equity
Preferred Stock
Struggling with Financial Accounting?
Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Preferred stock ______.
A
cannot be converted into common stock under any circumstances
B
is classified as a liability on the balance sheet
C
typically has priority over common stock in the payment of dividends
D
always carries voting rights equal to common stock
Verified step by step guidance1
Understand the concept of preferred stock: Preferred stock is a type of equity security that typically has features prioritizing it over common stock in certain aspects, such as dividend payments and claims on assets during liquidation.
Clarify the dividend priority: Preferred stockholders usually receive dividends before common stockholders. This priority is one of the defining characteristics of preferred stock.
Analyze voting rights: Unlike common stock, preferred stock generally does not carry voting rights. This is an important distinction between the two types of stock.
Examine convertibility: Preferred stock can sometimes be converted into common stock, depending on the terms set by the issuing company. It is not universally non-convertible.
Review classification on the balance sheet: Preferred stock is classified as equity, not a liability, on the balance sheet. This is because it represents ownership in the company, even though it has some features similar to debt.
6:28mWatch next
Master Issuing Preferred Stock with a bite sized video explanation from Brian
Start learningRelated Videos
Related Practice
Preferred Stock practice set
Problem sets built by lead tutorsExpert video explanations