Question

All questions are true/false

1. bid price > asked price

2. stock dividend's are treated as an interest expense on a firm's income statement

3. bondholder's are normally denied company voting rights

4. It is fair to say that preemptive rights are more valuable to small investors than to large ones

Answer 1

1.The given statement is False

Bid price represents the maximum price that a buyer is willing to pay for a stock whereas ask price represents the minimum price that a seller is willing to take for the same stock.In other word,bid price is the purchase price and ask price is sale price of the same stock.

In general,bid price cannot be higher than the ask price.

2.The given statements are false

Since Stock dividend distributed to shareholders are not recorded as an expense on a company's income statement.It does not affect the company's net income instead dividends impact the shareholders's equity section of the balance sheet.