Question

22. Which of the following statements concerning preferred stocks is true? a. Preferred stockholders have anrior claim on the income and assets of the firm as compared to the claims of lenders. b. Preferred stock dividends per share are normally increased as the earnings of the firm increase. c. Preferred dividends per share are usually not cut or suspended unless the firm is faced with serious financial problems. d. The par value of a stock is always the same as the initial selling price. 23. Which of the following is not a characteristic of long-term debt? a. interest paid to bond holders is a tax-deductible expense to the firm b. firm is not legally required to pay interest to bond-holders c. usually has a specific maturity d. all of the above are characteristics of long-term debt 24.A sinking fund allows the issuer to a. redeem an entire debt issue prior to maturity b. purchase a portion of the debt each year in the open market or call a portion of the debt for mandatory redemption c. call the entire debt issue d. accumulate interest expenses into a sinking fund account 25. The call feature is an advantage to the issuing firm a. if the bond has a floating rate b. if interest rates decline c. if the bond has a low par value d. if interest rates increase

Answer 1

option (c) is correct. Preferred dividends not cut or suspended unless the firm is serious financial trouble. are faced usually with Option (a) is incorrect because have a clain post those of the preferred stockholders lenders. option (b) is incorrect because are generally a fixed amount payments on a bond. preferred similar dividends. to interest aption (d) is incorrect because the selling price is dependent on multiple faitors and is not equal to The pan value.