Answer the following parts of the qauestion AND SHOW THE CALCULATION FOR THE b S
ID: 2780307 • Letter: A
Question
Answer the following parts of the qauestion AND SHOW THE CALCULATION FOR THE b SECTION:
a. The letter giving the holder of the letter right to buy additional shares of stock at a fixed price on the last day business day of next month is called?
b.Preferred stock did not pay a dividend in 2016 and 2017. Each dividend was $1.75. Which is most true
A.The company owes preferred stockholders $1.75
B.The company owes preferred stockholders $3.50
C.The company must pay preferred stockholders $5.25
D.If cumulative preferred it owes $3.50 and if does not have cumulative clause owes nothing.
c.Which statement is correct?
A.Dividends make the stockholder who receives them richer.
B.Dividends make the stockholder who receives them poorer
C.Dividends make the stockholder who receives are neither richer or poorer
Explanation / Answer
a) The letter giving the holder of the letter right to buy additional shares of stock at a fixed price on the last day business day of next month is called a Stock Warrant.
b) In case of cumulative preferred stock, the company owes all the missed dividends to the cumulative preferred stock holders whereas in case non-cumulative, if the company chooses not to pay any dividend, the preferred stockholder does not have any right to claim any of the unpaid dividends in the future. Therefore, Option D is correct. Also, Dividend for two years = $1.75 x 2 = $3.50
c) Option A is correct as Dividend is an income to a stockholder. Therefore, it makes them richer.