Identify the reasons due to which preferred stock is often considered debt in disguise. More than one answer may be correct. Multiple select question. Preferred stocks are not transferable. Preferred shareholders do not receive any returns over and above the stated return. Preferred stocks carry credit ratings. Preferred stocks are not callable.

Identify the reasons due to which preferred stock is often considered debt in disguise. More than one answer may be correct. Multiple select question. Preferred stocks are not transferable. Preferred shareholders do not receive any returns over and above the stated return. Preferred stocks carry credit ratings. Preferred stocks are not callable.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 3MC

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Which of the following statements is false? The cost of debt securities is highest due to their relatively low risk The cost of common stock is highest due to its relatively high risk The cost of preferred stock falls somewhere between debt and common stock None of the above
Which of the following statements about preferred stock is false? Multiple choice question. Preferred stock is sometimes convertible into debt. Preferred stock is often callable by the issuer. Preferred stock often carries a credit rating. Preferred stock pays a stated dividend.
Which of the following statements correctly describe characteristics of preference shares? Group of answer choices A. The required return on preference equity is expected to be less than the required return from ordinary equity. B. None of the other statements are correct C. A participating preference share participates in the interest payments paid to debtholders. D. Preference shares are called “hybrid” securities because they display characteristics of both short-term and long-term debt.
Please provide answer of question no. 3
Which of the following statements is false? a. the common stock account has a credit balance. b. the additional paid-in capital account has a credit balance. c. common stock may be issued for more than par value. d. the par value of common stock represents the stock's market value.
is NOT a characteristic of a money market instrument. A. illiquidity B. short maturity C. low risk D. none of above Which of the following is a characteristic of preferred stock? A. Give voting rights to its owner. B. It is like annuity. C. Investors cannot force the payment of the dividend. D. Dividends are tax-deductible for the fim as opposed to interest payment. Which of the following is NOT money market security? A. Bankers acceptance B. Treasury notes C. Federal funds D. Eurodollars and Eurodollar CD's
Which statement regarding treasury stock is false?a. Treasury stock is considered to be issued but notoutstanding.b. Treasury stock has no voting, dividend, or liquidationrights.c. Treasury stock reduces total stockholders’ equity onthe balance sheet.d. None of the above are false.
Which of the following is the reason that preferred dividends declared during the period are deducted from net income in calculating return on common stockholders’ equity? a. Preferred dividends are not paid from net income. b. Preferred dividends are not a part of stockholders’ equity. c. Preferred dividends are not paid until all common stockholders have received their dividends, so preferred dividends are not relevant in the formula and so must be taken out of the equation. d. Preferred dividends will reduce the amount of income available for distribution to common stockholders.
The cash flows associated with common stock are more difficult to estimate than those related to bonds because stock has a residual claim against the company versus a contractual obligation for a bond. Group of answer choices True False
Why is preferred stock referred to as a hybrid security? It is often said to combine the worst features of common stock and bonds. What is meant by this statement? How does a common stockholder receive two types of returns?
Which of the following is a difference between stocks and bonds? Select one: a. cash flows to bondholders are not known and not promised, cash flows to stockholders are known and promised b. companies issue stocks to grow the company and issue debt to pay bills c. required returns on debt are typically lower than required returns on equity d. dividends are legal obligations of the firm; coupons are not. Clear my choice
PART A: Common stock has seniority relative to preferred stock. True False PART B: Issuance or flotation costs are the costs investors pay to brokers when they purchase common stock. True False