15) Which of the following typically applies to common stock but not to preferre
ID: 2799280 • Letter: 1
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15) Which of the following typically applies to common stock but not to preferred stock? A) par value B) dividend yield C) legally considered as equity in the firm D) voting rights 16) Common stockholders are sometimes referred to as A) non preemptive right holders B) managers C) creditors D) residual owners 17) Dividends in arrears that must be paid to the preferred stockholders before payment of dividends to common stockholders are A) cumulative B) nonparticipating C) participating D) convertible 18) Shares of stock currently owned by a firm's shareholders are called- A) authorized shares B) issued shares C) outstanding shares D) treasury shares 19) A firm issued 5,000 shares of S1 par-value common stock, receiving proceeds of S20 per share. The amount recorded for the paid-in capital in excess of par account is A) $5,000 B) S95,000 C) S100,000 D) SO 20) to purchase additional shares at a price below the market in direct proportion to their number of owned shares. A) Rights offering B) Treasury stocks C) Preemptive rights D) Proxy statements are financial instruments that allow stockholders pice,Explanation / Answer
15. The answer is D
Preferred stock does not have voting rights usually. Only common stock is entitled to voting rights.
16. The answer is D
Common stockholders are called residual owners because they are entitled to residual earnings every year, that is after all the expenses have been paid. Even at the time of winding up of a company common stock holders receive what remains after settling the claims of all the stakeholders have been settled.
18. The answer is C
Authorised shares are the total number of shares that a company is authorised to issue by the law.
Issued shares are the shares that have been issued to shareholders.
Outstanding shares are the shares currently issued to shareholders. They are equal to issued shares less treasury shares.
Treasury shares are shares reacquired by a company but not retired by them.
Since the question specifies, shares currently owned by shareholders, the answer is outstanding shares because issued shares may be inclusive of treasury shares which are owned by the company.
19. The answer is D
Paid in capital is always recorded at the par value if shares. Amount received in excess of par value is taken to Securities Premium A/c.
20. The answer is A
A rights offer gives a right to existing shareholders to subscribe to a fresh issue at a concessional price. Such a right is proportional to existing shareholding.
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