Why does preferred stock not have the potential for capital gains like common stock does?
What will be an ideal response?
Answer: Capital gains represent the earnings growth of a company reflected in the market price of its stock. Preferred shareholders receive preferential treatment in the payment of dividends but these dividends are normally fixed. As the company's profits grow, the preferred dividends do not grow accordingly. The market price of preferred stock is determined by these fixed dividends. The growth in earnings is then passed on to the common stockholders in the form of increased dividends or retained earnings for more growth. Growing earnings leads to increased market demand for the common stock which leads to bigger capital gains potential.
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Describe franchising.
What will be an ideal response?
In the portfolio matrix, a _____ is in a low-growth market, but the product has a dominant market share; it is an SBU that generates more money than it needs to maintain its market share
a. problem child b. dog c. star d. cash cow
Vinson Manufacturing requires all capital investment projects to have a payback period of 5 years or less. Vinson is currently considering an equipment purchase that has an initial cost of $90,000. The equipment is expected to have a ten year life and a salvage value of $5,000. Assuming cash flows are equal, what does the annual cash flow generated by the equipment need to be in order to meet the
payback period requirements? A) $18,000 B) $19,000 C) $17,000 D) $9,000
As opposed to civil trials, a defendant in a criminal case can be compelled to testify
Indicate whether the statement is true or false