Chapter 11

Participating preferred stock has a feature that allows it to share with common shareholders in any dividends paid in excess of the percent or dollar amount stated on the preferred stock.

True

Whenever the dividend rate on preferred stock is lower than the rate the corporation earns on its assets, the effect of issuing preferred stock is to increase the rate earned by common shareholders.

True

Cumulative

Holders of the stock are entitled to receive current and all past dividends before common stockholders receive any dividends.

NonParticipating

Holders of the stock are not entitled to receive dividends in excess of the stated rate.

Participating

Holders of the stock can receive dividends exceeding the stated rate under certain conditions.

Noncomulative

Holders of the stock lose any dividends that are not declared in the current year.

Callable preferred stock gives its holders the option of exchanging their preferred shares into common shares at a specified rate.

False

Owners of preferred stock usually have the right to sell their stock, voting rights, preference to dividends, and preference to assets at liquidation.

False