Which of the following statements is TRUE?
A)Preferred stock usually has a stated or par value and,like bonds,this par value is not repaid at maturity because preferred stocks do not have a maturity date.
B)The par value for preferred stock,unlike bonds,is never paid back.
C)A preferred stock's cash dividend due each year is based on the stated dividend rate times the market value of the stock.
D)Some preferred stocks are cumulative with respect to dividends,meaning that if a company skips a cash dividend,it must pay it at some point in the future.

Question

Quizplus · Accepted Answer

Option A is incorrect because preferred stock may or may not have a stated or par value, and preferred stock dividends are paid at a stated periodic rate. Option B is incorrect because some preferred stocks have a par value that can be paid back at a later date. Option C is incorrect because preferred stock dividends are based on the stated dividend rate and not the market value of the stock. However, Option D is correct because some preferred stocks are indeed cumulative, meaning that any skipped dividend payments must be made up in the future, before any common stock dividend payments can be made.

Which of the Following Statements Is TRUE