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 is a characteristic of preferred stock?

Preferred stockholders typically receive dividends before common stockholders.

Preferred stock dividends are tax-deductible for the issuing corporation.

Preferred stock must be repaid at maturity like a bond.

Preferred stockholders have voting rights in corporate decisions.

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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 has priority over common stock in terms of dividend payments and claims on assets in the event of liquidation.

Analyze the first option: 'Preferred stockholders typically receive dividends before common stockholders.' This is a key characteristic of preferred stock, as preferred shareholders are entitled to receive dividends before any dividends are paid to common shareholders.

Evaluate the second option: 'Preferred stock dividends are tax-deductible for the issuing corporation.' This statement is incorrect because dividends paid on preferred stock are not tax-deductible for the issuing corporation; only interest payments on debt are tax-deductible.

Examine the third option: 'Preferred stock must be repaid at maturity like a bond.' This is incorrect because preferred stock does not have a maturity date and does not require repayment like a bond. It is considered equity, not debt.

Review the fourth option: 'Preferred stockholders have voting rights in corporate decisions.' This is generally incorrect because preferred stockholders typically do not have voting rights, unlike common stockholders who usually have voting rights in corporate decisions.