Capstone Chapter 8

Which of the following is one of the two generally practiced methods for electing corporate directors?

Cumulative Voting

Which of the following is not usually a right or attribute of preferred stock?

Having a claim to dividends in excess of the annual dividend requirement if dividends on common stock exceed dividends on preferred stock.

The term preemptive right pertains to which of the following?

Present shareholders' right to purchase shares from any additional share issuances.

The declaration date pertains to:

The date on which the board of directors declares a dividend.

The declaration of a cash dividend by the directors results in:

a decrease in retained earnings and an increase in current liabilities.

Retained earnings represents

cumulative net income of the firm since its beginning that has not been distributed to its stockholders in the form of dividends

Preferred stock is used much less than long-term debt in the capital structure of most industrial and merchandising companies principally because:

for income tax purposes, dividends paid on preferred stock are not deductible, but interest on long-term debt is deductible.

When common stock has a par value:

there will probably be additional paid-in capital on the balance sheet.

When a stock dividend is declared and issued:

total stockholders' equity does not change

When a firm purchases its own shares as treasury stock

total stockholders' equity is decreased.