fixed amount of dividends
fixed amount of shares
variable amount of dividends
variable amount of shares
Answer is Right!
Answer is Wrong!
The correct answer is A. fixed amount of dividends.
Preferred stock dividends are paid out before common stock dividends, and they have a fixed amount that is specified in the company’s bylaws. This means that preferred shareholders are guaranteed to receive a certain amount of money each year, regardless of the company’s performance. Common stock dividends, on the other hand, are not guaranteed. They are only paid out if the company has enough profits to do so. Additionally, the amount of common stock dividends can vary from year to year, depending on the company’s performance.
Here is a brief explanation of each option:
- A. Fixed amount of dividends: Preferred stock dividends are paid out before common stock dividends, and they have a fixed amount that is specified in the company’s bylaws. This means that preferred shareholders are guaranteed to receive a certain amount of money each year, regardless of the company’s performance.
- B. Fixed amount of shares: This is not correct. The number of shares of preferred stock that a company issues is not fixed. It can be increased or decreased by the company’s board of directors.
- C. Variable amount of dividends: This is not correct. Preferred stock dividends are paid out before common stock dividends, and they have a fixed amount that is specified in the company’s bylaws. This means that preferred shareholders are guaranteed to receive a certain amount of money each year, regardless of the company’s performance.
- D. Variable amount of shares: This is not correct. The number of shares of preferred stock that a company issues is not fixed. It can be increased or decreased by the company’s board of directors.