Which of the following statements best describes preferred
stock?
Multiple Choice
-
Preferred stock holders are usually granted the right to vote
only in the event that dividends due are fully paid to
stockholders. -
If a corporation's articles allow redemption, the corporation
can buy back preferred stocks even if the holders do not wish to
sell. - Preferred stock cannot be converted into common stock.
-
Redemption of preferred stocks is allowed irrespective of
whether the cost would make the corporation insolvent or not.
Distributions of shares in the corporation itself are called
_____.
Multiple Choice
- cash dividends
- stock dividends
- equity securities
- property dividends
Answer
1)
Preference shares are the shares of a company, in which the
company pays out dividends to these shareholders, before they pay
dividends to common shareholders.
On the other hand, common share holders have voting rights,
whereas preference shareholders do not have any voting rights.
Redemption of preference shares is the process where these
shareholders are repaid and the shares are bought back by the
company.
Hence the correct answer is Option D) redemption is
allowed irrespective of whether the cost will make the company
insolvent
2)
A stock dividend is the dividend payment made to shareholders in
the form of shares rather than cash. In this case, the company will
distribute shares.
Hence the correct answer is Option b) Stock
dividends
