Which of the following are characteristics of preferred stock? I) It pays its holder a fixed amount of income each year at the discretion of its managers.
II) It gives its holder voting power in the firm.
III) Its dividends are usually cumulative.
IV) Failure to pay dividends may result in bankruptcy proceedings.

Question

Quizplus · Accepted Answer

Preferred stock pays a fixed amount of income each year, but the payment is not mandatory and determined by the managers. The dividends are usually cumulative, meaning that if the company fails to pay dividends, they will accumulate and must be paid before common stock dividends. However, preferred stockholders do not usually have voting power in the firm. While failure to pay dividends may result in consequences for the company, preferred stockholders do not typically have the power to force bankruptcy proceedings. Therefore, the characteristics of preferred stock are I and III.

Which of the Following Are Characteristics of Preferred Stock? I)