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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

A stockbroker advises a client to “buy preferred stock, ... With that type of stock, ... [you] will never have to worry about losing the dividends." Is the broker correct?

To determine

Types of Stock

Generally the corporations issue two primary classes of stocks or paid-in- capital, they are:

  • Common Stock
  • Preferred Stock

To Determine: If the stock broker is right when he recommends preferred stock to his client and says with that type of stock he need not have to worry about losing the dividends.

Explanation

No, the stock broker is not right when he recommends preferred stocks to his client and assures that the client need not worry of losing the dividends. This is because, unless the corporation declares the dividend and unless the preferred stock is a cumulative in nature, all the s...

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