Question

All of the following statements are true about both bonds and preferred stock except:

A. Both bonds and preferred stock are "Senior" securities over common stock in a dissolution
B. Both bonds and preferred stock can be convertible
C. Payments to both bondholders and preferred stockholders are subject to approval of the Board of Directors
D. Both bonds and preferred stock have a stated fixed payment rate

Answer 1

C: Payments to both bondholders and preferred stockholders are subject to approval of the Board of Directors

Step-by-step explanation:

Bonds and Preferred stock are not subject to approval by the Board of Directors.

This is because Bond and Preferred stock holders are considered above other owners in a company and must be paid their due even if the company makes profit or not. However, where no profit is recorded for the year, Bond and stock holders could be paid in arrears.