The par value on a preferred stock entitles the holder:
A) priority on all cumulative dividends.
B) an established amount of money if the company is liquidated.
C) a minimum amount of convertible common stock.
D) None of these.

Question

Quizplus · Accepted Answer

The par value on a preferred stock represents the minimum amount that the holder will receive in the event of the company's liquidation. Therefore, option B is correct. Priority on all cumulative dividends (option A) and a minimum amount of convertible common stock (option C) are not necessarily tied to the par value of the preferred stock. Option D is incorrect because B is the correct choice.

The Par Value on a Preferred Stock Entitles the Holder