WGU C214 Financial Management Pass the OA Questions with Correct Answers.

Characteristics of preferred stock includes Correct Answers -dividends in arrears -dividends are cumulative -higher payoff claim in a BK (has first dibs in a BK) -considered "hybrid" (part stock/part bond) -no fixed maturity date -no voting rights -can skip dividend payments -dividends don't change year-after-year -used in start ups (IPO) Preferred stock dividends Correct Answers can go without payment and pay in arrears the following year Characteristics of common stock are Correct Answers -voting rights -no maturity date -corporate governance -lower payoff claim in BK -variable returns -unlimited earnings potential -earnings are in dividends & the increase in price of stock New start up ventures often issue Correct Answers preferred stock (in an IPO) What stock is considered a hybrid Correct Answers preferred stock One thing common stock and preferred stock have in common is Correct Answers both have no maturity date Which type of security has voting rights Correct Answers common stock Debt covenants and restrictions help to ensure that Correct Answers management is meeting bond and shareholder expectations NOTE: covenants are promises meant to be kept What is true regarding bonds Correct Answers -when bond matures, bondholder gets lump sum back -coupon rate doesn't change -maturity is in years -PAR value is typically $1000 -Future value (same as PAR) is typically $1000