Question

Preferred stock comes in many varieties. ___ preferred stock includes a requirement that past dividends not paid must be paid in future years before any common stock dividends may be paid. ___ preferred stock includes the ability to collect dividends with the common stock owners after all preferred dividends have been paid. ___ preferred stock may be turned in for common stock under certain conditions. ___ preferred stock, also known as callable preferred stock, comes with the risk that the issuing company may ___ the shares under certain conditions.

Fill in the blanks with words that would best complete the passage.

Cumulative

repurchase

Transferable

resell

Common

Sellable

Participating

Redeemable

Convertible

Answer 1

Cumulative

Participating

Convertible

Redeemable

Repurchase

Step-by-step explanation:

Cumulative preference shares are those preference shares wherein the annual dividend must be paid. In case dividend is not paid for an year, it gets accrued and in such a scenario, no common stock dividend can be paid unless cumulative preference dividend is paid.

Participating preference shares are those preferred stock holders who apart from receiving their own dividends are eligible to participate in dividends payable to common stockholders provided the dividend rate for common stockholders is increased.

Convertible preferred stocks are those which can be converted into common stock as per a specified conversion ratio and under other conditions.

Redeemable or callable preferred stocks are those wherein the issuer company has the right to repurchase/call or redeem such preferred stocks via creation of a sinking fund for such redemption.