Preferred stock ________. A) reflects residual ownership of a company

Preferred stock ________.

A) reflects residual ownership of a company
B) represents a preferential claim on dividends
C) will be “paid” before the bondholders
D) always has a legal and specific claim to a fixed amount (listed as a liability)

ANSWER

Answer: B
Explanation: B) COMMON STOCK reflects residual ownership of a company. Preferred stock will be “paid” AFTER the bondholders. A BOND always has a legal and specific claim to a fixed amount (listed as a liability).