Question

Which of the following statements about preferred stocks is FALSE?

a) Two methods of reliring common stock are call provisions and sinking fund provisions.
b) Preferred stocks are similar to bonds in that the dividends are fived.
c) Preferred stocks are similar to common stocks in that there is no fired maturity date.
d) Preferred stocks have priority over oommon stock regarding daim on assets in the case of bankruptcy.

Answer 1

The false statement about preferred stocks is that call provisions and sinking fund provisions are methods of retiring common stock; these mechanisms are typically associated with bonds instead.

Step-by-step explanation:

The false statement about preferred stocks from the options provided is: a) Two methods of retiring common stock are call provisions and sinking fund provisions. This statement is incorrect as it refers to mechanisms often associated with bonds, not common stock. Preferred stocks do share characteristics both with bonds, such as fixed dividends (statement b), and with common stocks, such as lacking a fixed maturity date (statement c). Additionally, preferred stocks have a higher claim on assets over common stock in the event of bankruptcy (statement d).