Which of the statements below is FALSE? A. Preferred stock does not have a maturity date. B. Preferred shareholders' dividend claims take precedence over common shareholders' dividend claims. C. Preferred stock cannot be converted into common stock. D. It is common for companies to issue preferred stock with the right to convert to common shares after a specific waiting period

Question

Business

Leila Goodwin

6 November, 12:57

Which of the statements below is FALSE? A. Preferred stock does not have a maturity date. B. Preferred shareholders' dividend claims take precedence over common shareholders' dividend claims. C. Preferred stock cannot be converted into common stock. D. It is common for companies to issue preferred stock with the right to convert to common shares after a specific waiting period

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Answers (1)

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Jasper Tucker · Answer 1

C. Preferred stock cannot be converted into common stock.

Explanation:

"Equity" refers to shareholders' ownership in a company. Such ownership can be classified into as "preferred stock" or "common stock."

"Preferred stock" is also known as "preferred shares." It is considered a hybrid instrument because it possesses combination of features which cannot be found in a common stock. A "common stock," on the other hand, refers to ordinary shares that entitles the holder.

Remember that a preferred stock can be converted into a common stock. This means that it can be exchange for a particular number of shares, depending on the situation. The investor and the board of directors have the ability to convert some preferred stocks into common stocks. There are times when the stocks already have a specified date for conversion.

So, this explains the answer.