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1. What features make preferred stock similar to debt? Similar to common stock?
2. What is meant by dividend arrearage on preferred stock? If dividends are two years in arrears
on $500,000 of 6% preferred stock, and dividends are declared at the end of this year, what
amount of total dividends must preferred stockholders receive before any distributions are made to
common shareholders?
3. Distinguish between authorized stock and issued stock. Why might the number of shares issued
be more than the number of shares outstanding?
4. Describe the difference between contributed capital and earned capital. Specifically, how can
earned capital be considered an investment by the company's shareholders?
THANK YOU

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