What provisions are available to protect a preferred stockholder?
What will be an ideal response?
Most preferred stocks carry a cumulative feature that requires all past, unpaid preferred stock dividends to be paid
before any common stock dividends are declared. In addition to the cumulative feature, protective provisions are
common to preferred stock. These protective provisions generally allow for voting rights in the event of nonpayment
of dividends, or they restrict the payment of common stock dividends if the preferred stock payments are not met or if
the firm is in financial difficulty. Much of the preferred stock that is issued today is convertible preferred stock; that is,
at the discretion of the holder, the stock can be converted into a predetermined number of shares of common stock. A
sinking-fund provision requires the firm periodically to set aside an amount of money for the retirement of its
preferred stock. This money is then used to purchase the preferred stock in the open market or to call the stock,
whichever method is cheaper.
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An analysis in which all the components of an income statement are expressed as a percentage of sales is a
a. vertical analysis b. horizontal analysis c. liquidity analysis d. solvency analysis
A firm selling food should have higher inventory turnover rate than a firm selling office furniture
Indicate whether the statement is true or false
Specialization is creating a ________ from an existing class by defining elements that are too specific for the parent class
A) subclass B) superclass C) either A or B D) neither A or B
Which statement is true regarding the capital market line (CML)?
I) The CML is the line from the risk-free rate through the market portfolio. II) The CML is the best attainable capital allocation line. III) The CML is also called the security market line. IV) The CML always has a positive slope. A. I only B. II only C. III only D. IV only E. I, II, and IV