IIA Exam IIA-ACCA Topic 1 Question 55 Discussion

Actual exam question for IIA's IIA-ACCA exam

Question #: 55
Topic #: 1

[All IIA-ACCA Questions]

Preferred stock is less risky for investors than is common stock because:

ACommon stock pays dividends as a stated percentage of face value.

BCommon stock has priority over preferred stock with regard to earnings and assets.

CPreferred dividends are usually cumulative.

DPreferred stock with no conversion feature has a higher dividend yield than does convertible preferred stock.

Show Suggested Answer

Suggested Answer: C

by Arlette at Feb 27, 2023, 12:22 PM

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Remona

4 days ago

Haha, I bet the finance professor who wrote this question loves to see students struggle with these nuanced stock market details. I'm going with C, the cumulative dividends seem key here.

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Cheryll

15 days ago

I believe common stock has priority over preferred stock with regard to earnings and assets, making it riskier.

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Lorean

17 days ago

I was torn between B and C, but I'll go with C. The cumulative dividends on preferred stock provide a safety net for investors.

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Johnna

18 days ago

I agree with Erinn, preferred stock is less risky due to cumulative dividends.

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I think C is the correct answer. Preferred dividends are usually cumulative, meaning if the company misses a payment, they have to make it up later. That makes preferred stock less risky for investors.

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Erinn

20 days ago

I think preferred stock is less risky because preferred dividends are usually cumulative.

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IIA Exam IIA-ACCA Topic 1 Question 55 Discussion

Contribute your Thoughts:

Remona

Cheryll

Lorean

Johnna

Micaela

Erinn