Question 1. Key differences between common stock and bonds include all of the following EXCEPT
1. bonds have a stated maturity but stock does not.
2. common stockholders have a junior claim on assets and income relative to bondholders.
3. common stockholders have a voice in management; bondholders do not.
4. dividends paid to bondholders are tax-deductible but interest paid to stockholders is not.
Question 2. ________ are promised a fixed periodic dividend that must be paid prior to paying any common stock dividends.
1. Creditors
2. Bondholders
3. Preferred stockholders
4. Common stockholders
Question 3. All of the following features may be characteristic of preferred stock EXCEPT
1. convertible.
2. callable.
3. no maturity date.
4. tax-deductible dividends.
Question 4. As a form of financing, equity capital
1. has a maturity date.
2. is only liquidated in bankruptcy.
3. has priority over bonds.
4. is temporary.
Question 5. The par value on common stock has all of the following characteristics EXCEPT
1. a generally low value.
2. stated in the corporate charter.
3. some states tax according to the par value.
4. indicates the market value at which the stock was originally sold.
Question 6. The opportunity for management to purchase a certain number of shares of their firm's common stock at a specified price over a certain period of time is a
1. warrant.
2. stock right.
3. pre-emptive right.
4. stock option.
Question 7. A firm has an outstanding issue of 1,000 shares of preferred stock with a $100 par value and an 8 percent annual dividend. The firm also has 5,000 shares of common stock outstanding. If the stock is cumulative and the board of directors has passed the preferred dividend for the prior two years, how much must the preferred stockholders be paid prior to paying dividends to common stockholders at the end of the third year?
1. $ 8,000
2. $16,000
3. $24,000
4. $25,000
Question 8. A firm issued 5,000 shares of $1 par-value common stock, receiving proceeds of $20 per share. The accounting entry for the paid-in capital in excess of par account is
1. $ 95,000.
2. $100,000.
3. $0.
4. $5,000.
Question 9. An 8 percent preferred stock with a market price of $110 per share and a $100 par value pays a cash dividend of ________.
1. $80.00
2. $8.80
3. $8.00
4. $4.00