Subscribe

A stoci. broker advises a client to "buy preferred stock.... With that type of stock... $[$you$]$ will never have to worry about losing the dividends." Is the broker correct?

Lou Hoskins and Shirley Crothers are organizing Red Lodge Metals Unlimited Inc. to undertake a high$-$risk gold$-$mining venture in Canada. Lou and Shirley tentatively plan to request authorization for $400,000,000$ shares of common stock to be sold to the general public. Lou and Shirley have decided to establish par of $$0\mathrm{.}03$ per share in order to appeal to a wide variety of potential investors. Lou and Shirley believe that investors would be more willing to invest in the company if they received a large quantity of shares for what might appear to be a "bargain" price.

Discuss whether Lou and Shirley are behaving in a professional manner. Can you elaborate a thorough answer, using accounting terminology$/$theory$.$ Thank you!