Answered: Investors purchase preferred stock…

Investors purchase preferred stock because: Group of answer choices A)Preferred stock offers an opportunity for a guaranteed annual dividend. B)Preferred dividends are increased each year.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Investors purchase preferred stock because:

Group of answer choices

A)Preferred stock offers an opportunity for a guaranteed annual dividend.

B)Preferred dividends are increased each year.

C)Preferred shareholders have voting rights.

D)Preferred stock can always be converted to common stock.

E)None of the above

Definition Definition Type of stock which is granted priority over dividend distributions as compared to common stockholders. Preferred stocks also do not carry any voting rights. Notably, in a case where a company is going to be liquidated, preferred stockholders have a priority claim on the value of assets of the company as quoted in the balance sheet, as compared to the common stockholders.

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