Question

Select all that apply

Answer 1

Answer:

Preferred stock is advantageous in that it:

(1) has priority over common stock when dividends are declared.

(3) has priority over common stock at liquidation.

Explanation:

2 and 4 are not correct.

(2) in the case of liquidation, priority of payment is made according to seniority ranking. Creditors is ranked higher than preferred shareholders, so they will recieve payments first.

(4) a company is not obligated to pay dividends to shareholders as with interest payment to creditors. So, the creditors would recieve their interest payments first.