The par value on a preferred stock entitles the holder to
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 options are true.

Question

Quizplus · Accepted Answer

The par value on a preferred stock entitles the holder to an established amount of money if the company is liquidated. This is because the par value is the face value of the stock that is initially set by the issuer and represents the minimum amount that the stockholder is entitled to receive in the event of liquidation. The par value also serves as a basis for calculating dividends on preferred stock. However, it does not necessarily provide priority on all cumulative dividends or any amount of convertible common stock.

The Par Value on a Preferred Stock Entitles the Holder