Question

Preferred stock typically has a par value, and the dividend is often stated as a percentage of par. The par value is also important in the event of liquidation, as the preferred stockholders are generally entitled to receive the par value before anything is given to the common stockholders.

A.True
B.False

Answer 1

Preferred stock has a par value and pays dividends as a percentage of this value. Preferred stockholders are entitled to receive the par value before common stockholders in the event of liquidation.

Step-by-step explanation:

Preferred stock typically has a par value, and the dividend is often stated as a percentage of par. The par value is also important in the event of liquidation, as the preferred stockholders are generally entitled to receive the par value before anything is given to the common stockholders.

For example, if a company has preferred stock with a par value of $100 and the dividend is set at 5% of par value, the preferred stockholders would receive a dividend of $5 per share.

If the company goes through a liquidation process, the preferred stockholders would have the right to receive their par value of $100 per share before any proceeds are distributed to the common stockholders.