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 best describes the difference between preferred and common stocks?

Common stockholders are always guaranteed a fixed dividend, while preferred stockholders are not.

Preferred stockholders have voting rights in corporate decisions, while common stockholders do not.

Common stock is typically less risky than preferred stock.

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

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Verified step by step guidance

Understand the concept of common stock: Common stock represents ownership in a corporation and typically comes with voting rights, allowing shareholders to participate in corporate decisions. However, dividends for common stockholders are not guaranteed and depend on the company's profitability and discretion.

Understand the concept of preferred stock: Preferred stockholders generally do not have voting rights, but they have priority over common stockholders in receiving dividends. Preferred dividends are often fixed and paid before any dividends are distributed to common stockholders.

Compare the risk levels: Common stock is generally considered riskier than preferred stock because common stockholders are last in line to receive assets in the event of liquidation, and their dividends are not guaranteed.

Clarify the dividend priority: Preferred stockholders are entitled to receive dividends before common stockholders. This priority makes preferred stock more appealing to investors seeking stable income.

Summarize the key difference: The main distinction is that preferred stockholders have priority in receiving dividends, while common stockholders have voting rights and potential for higher returns but face greater risk.