Preferred stock exhibits some of the characteristics of long-term debt in that its dividend is generally constant and preferred
stockholders are paid before common shareholders in the event the firm is liquidated.

Question

Quizplus · Accepted Answer

Preferred stockholders receive a fixed dividend, similar to the fixed interest payments made to bondholders. In addition, in the event of liquidation, preferred stockholders have a claim on the firm's assets before common stockholders, similar to the priority given to bondholders in the event of default.

Preferred Stock Exhibits Some of the Characteristics of Long-Term Debt