CFA Practice Question

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.
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