Please discuss the following questions:

1. A stockbroker advises a client to buy preferred stock, saying "With this type of stock, you will never have to worry about losing the dividends." Is the broker right?

2. A corporation with both preferred stock and common stock outstanding has a substantial credit balance in its retained earnings account at the beginning of the current fiscal year. Although net income for the current year is sufficient to pay the preferred dividend of $150,000 each quarter and a common dividend of $90,000 each quarter, the board of directors declares dividends only on the preferred stock. Suggest possible reasons for not paying dividends on the common stock.

3. What is the primary purpose of a stock split? What difference between a stock split and a stock dividend?