CFA Practice Question
Redeemable preferred stock
A. is reported in stockholders' equity of the balance sheet.
B. is reported after liabilities but before the equity section of the balance sheet.
C. has higher priority for liquidation and dividends than preferred stock.
Explanation: The liquidation preference or redemption price should be used in the computation of book value per share, leverage, and capital ratios.
User Contributed Comments 8
| User | Comment |
|---|---|
| danlan | Is C correct? |
| eddeb | No higher priority than preferred, as it is preferred. |
| uviolet | the priority of payment is liabilities (debts), then preferred stock (any type) and then equities. no priority within preferred stock return. redeemable simply means that the stock can be purchased back |
| tommyguard3 | Thanks for the clarification violet |
| mary11 | don't recall reading about rede. pref. stock. |
| bidisha | I think redeemable means callable |
| bacorson | This question makes it sounds as if Redeemable Pfd is part of liabilities, and not SE, which it is. |
| forry9er | This was a tough question ... To know that redeemable preferred stock is to be reported as a liability is very detailed. |