Question

Question 1.

Preferred stock has characteristics of both that and comes in stock. Which characteristics of preferred stocks resemble that of common stock?

A. Preferred & common dividends are not tax-deductible expenses; both preferred and common stocks are classified “shareholder equity“ on balance sheet; Preferred and common stock have infinite majorities; both pay dividends at managements discretion

B. Preferred and common stock both carry voting rights: preferred and common dividends are equally stable and are at management’s discretion

C. Preferred and common dividends are not tax-deductible expenses: preferred and common stock both carry voting rights

D. Preferred and common stock are classified as a liability on the balance sheet; preferred and common dividends are not tax-deductible expenses

Question 2.

All of the following are examples of financial assets except

A. Patent to new drug

B. Trademark

C. None of these are financial assets

D. Copy rights to a textbook

E. Inventory of office supplies

Answer 1

Sol:

Question 1 answer =option A

becasue all the features of common stock and preferred stocks are almost same except voting rights which are in the option b and c. And option d is also right but it has slight difference in classification as liability whereas option a has much more specified option.

Question 2 answer= option E

Because financial assets are those which have contractual value to receive cash. Here all the options are financial assets except inventory because its right to service not right to cash.