Which of the following is NOT one of the common features between preferred.stock and common stock?O No fixed maturity dateO Failure to pay dividends does not lead to bankruptcyPayments are fixedO Dividends are not a tax-deductible expense Which of the following are assumptions about patterns of dividends used tovalue stock?O Constant GrowthZero GrowthMixed GrowthO All of the above

The question is related to Common Stock and preferred stock. In ase of preferred Stock the paymemts…

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Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter7: Financial Activities

Section: Chapter Questions

Problem 8QE

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Owners of preferred stock are not guaranteed any dividend payments and have the lowest-priority claim on the firm’s assets in the event of bankruptcy. True False
Which of the following statements is CORRECT? a. The preferred stock of a given firm is generally less risky to investors than the same firm's common stock. b. Corporations cannot buy the preferred stocks of other corporations. c. Preferred dividends are not generally cumulative. d. A big advantage of preferred stock is that dividends on preferred stocks are tax deductible by the issuing corporation. e. Preferred stockholders have a priority over bondholders in the event of bankruptcy to the income, but not to the proceeds in a liquidation.
Which of the following is false? A. Under PFRS 9, the basis of carrying investments in debt securities as FVPL, FVOCI, or at amortized cost, is the entity’s business model. B. Under PFRS 9, an investment in equity securities not held for trading is automatically accounted for as FVOCI. C. Reclassification of investment in equity securities under PFRS 9 is not allowed. D. Under PFRS 9, reclassification of investment in debt securities is allowed. Or none of the choices?
Common stockholders: a) have a residual claim on both income and assets. b) have a higher claim on assets than preferred stockholders c) are last in line in the event of bankruptcy d) Both A & B e) Both A & C f) Both B &C g) All of the above
Indicate whether the following statements are true or false. If the statementis false, explain why.a. If a firm repurchases its stock in the open market, the shareholders whotender the stock are subject to capital gains taxes.
According to AC Topic 320, 'Investments - Debt and Equity Securities', all of the following changes in circumstances may cause an entity to change its intent to hold a certain security to maturity without calling into question its intent to hold other debt securities to maturity in the future, EXCEPT for: O a. Evidence of a significant deterioration in the issuer's creditworthiness O b. Changes in market interest rates and related changes in the security's prepayment risk Oc. A change in tax law that eliminates or reduces the tax-exempt status of interest on the debt security O d. A major business combination or major disposition that necessitates the sale or transfer of held-to-maturity securities to maintain the entity's existing interest rate risk position or credit risk policy
Assume that a firm had such serious financial problems that it was about to be liquidated after a bankruptcy. All of the firm's assets are about to be sold in order to pay the following claims against the firm: bondholders, preferred stockholders, common stockholders, and federal income taxes. Of the claims mentioned, what priority would common stockholders have? A. first B. third C. second D. fourth
All of the following statements are true regarding available-for-sale securities except a.changes in their fair values are not recognized on the income statement. b.they are recorded at fair value. c.a valuation allowance account is not used with available-for-sale securities. d.changes in their fair values are included as part of stockholders' equity.
From the issuing firm's point of view, one advantage of preferred stock over bonds is A) preferred dividends are a deductible expense for tax purposes. B) preferred voting privileges concentrate power in the hands of managers and major shareholders. C) a dividend payment can be skipped without triggering bankruptcy. D) all of the above
Which of the following statements is not true of the fair-value method of accounting for marketable securities? Select one: A. The investment account is recorded at current fair value on the balance sheet. B. Interim changes in the investments’ fair value may or may not affect income depending on the securities’ classification. C. This method is used when the reporting company generally owns less than 20% of the investee company. D. Dividends are treated as a return of the capital invested. E. None of the above
Which one of the following events must occur before a firm can offer a liquidating dividend? A. Negative equity B.Insolvency declaration C. Asset sale D. Failed bond issue
1)Which of theAllowing is an advantage for a firm to issue common stock over long-term debt? 1 point A) the cost of equity financing being less than the cost of debt financing B) the primary claim of equityholders on income and assets in the event of liquidation C) no maturity date on which the par value of the issue must be repaid D) the tax deductibility of dividends which lowers the cost of equity financing 2) Which of the following is a difference between common stock and bonds? 1 point A) Bondholders have a voice in management; common stockholders do not. B) Bondholders have a senior claim on assets and income relative to stockholders. C) Stocks have a stated maturity but bonds do not. D) Dividend paid to stockholders is tax-deductible but interest paid to bondholders are not 3) Holders of equity capital ________. 1 point A) own the firm B) receive interest payments C) receive guaranteed income D) have loaned money to the firm 4)Because equityholders are the last to receive any…

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