When the dividend rate on preferred stock is less than the rate of return earned on...
When the dividend rate on preferred stock is less than the rate of return earned on a corporation’s assets, it is called:
A. Financial leverage.
B. Discount on stock.
C. Premium on stock.
D. Preemptive right.
E. Capital gain.
Homework Answers
| When the dividend rate on preferred stock is less than the rate of return earned on a corporation’s assets, it is called Financial leverage. |
| Financial leverage increases rate of return earned by common stockholders when the dividend rate on preferred stock is less than the rate of return on assets. |
| Option A Financial leverage is correct |
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