Corporate Reporting and Analysis Flashcards
What is preferred stock?
Preferred stock is a type of equity security that has preferential rights over common stock, particularly in dividend payments and asset liquidation.
True or False: Preferred stockholders have voting rights in a company.
False
Fill in the blank: Preferred stocks typically pay a fixed ______.
dividend
What is a key difference between preferred stock and common stock?
Preferred stock has a fixed dividend and priority over common stock in asset liquidation, while common stock typically has voting rights and variable dividends.
What does it mean for preferred stock to be ‘cumulative’?
Cumulative preferred stock means that if a company skips dividend payments, those payments accumulate and must be paid before any dividends can be paid to common stockholders.
Multiple Choice: Which of the following is a characteristic of preferred stock? A) Voting rights B) Fixed dividends C) Higher risk D) None of the above
B) Fixed dividends
What is the primary advantage of investing in preferred stocks?
The primary advantage is the fixed dividend payments, which can provide a stable income stream.
True or False: Preferred stocks are generally less risky than common stocks.
True
What is ‘convertible preferred stock’?
Convertible preferred stock is a type of preferred stock that can be converted into a specified number of common shares at the option of the stockholder.
Fill in the blank: Preferred stock dividends are paid _______ common stock dividends.
before
What is ‘participating preferred stock’?
Participating preferred stock allows shareholders to receive additional dividends beyond the fixed rate if the company performs well.
Multiple Choice: Which of the following would typically have a lower yield? A) Common stock B) Preferred stock C) Bonds D) Real estate
B) Preferred stock
What does it mean for preferred stock to be ‘non-cumulative’?
Non-cumulative preferred stock means that if dividends are not paid in a given year, they do not accumulate and are lost.
True or False: Preferred stocks can be callable.
True
What is the significance of a ‘callable’ feature in preferred stocks?
A callable feature allows the issuing company to repurchase the preferred stock at a predetermined price after a certain date.
Fill in the blank: The market price of preferred stocks can be influenced by changes in ______ rates.
interest
What is the typical claim of preferred stockholders in the event of liquidation?
Preferred stockholders have a claim on assets before common stockholders but after debt holders.
Multiple Choice: Which is NOT a type of preferred stock? A) Cumulative B) Non-cumulative C) Fixed-rate D) Common
D) Common
True or False: Preferred stocks are more likely to be issued by stable companies.
True
What is a ‘preference’ in the context of preferred stocks?
Preference refers to the priority that preferred stockholders have over common stockholders in receiving dividends and during liquidation.
Fill in the blank: The dividend rate on preferred stock is usually expressed as a percentage of the ______.
par value
What is the main risk associated with preferred stocks?
The main risk is that dividends can be suspended, especially if the issuing company faces financial difficulties.
Multiple Choice: Which of the following is a disadvantage of preferred stocks? A) No voting rights B) Higher volatility C) Lower dividends D) More risk
A) No voting rights
What is a ‘dividend yield’ in relation to preferred stocks?
Dividend yield is a financial ratio that shows how much a company pays in dividends each year relative to its preferred stock price.
