Indicate whether each of the following statements about stockholders' equity is true or false._____ a) Preferred stockholders generally have no preference to assets when the company is liquidated._____ b) Preferred stockholders generally have a preference to dividends._____ c) Preferred stock carries voting rights that give the preferred stockholders greater power in the corporation's decision-making process than common stockholders have._____ d) Preferred stockholders generally receive a set or fixed amount of dividends._____ e) If a corporation has issued noncumulative preferred stock, common stockholders may receive greater dividends than if the corporation has issued cumulative preferred stock.

Question

What will be an ideal response?

Answer 1

a) This is false. Upon a corporation's liquidation, preferred stockholders have preference over common stockholders to the corporation's assets.
b) This is true. Preferred stockholders must be paid their dividends before common stockholders receive theirs.
c) This is false. Preferred stock does not carry voting rights.
d) This is true. Preferred stockholders generally receive a set dividend based on a percentage of the stock's stated value.
e) This is true. If a corporation issues cumulative preferred stock and fails to pay dividends one year, once the corporation does pay a dividend, it will pay more to preferred stockholders and less to common stockholders than if the preferred stock had been noncumulative.