Preferred stock is often sold by companies

Question

Quizplus · Accepted Answer

Preferred stock is often sold by companies wanting to balance their capital structures by adding a source of financing that is less risky than debt but still provides a fixed income stream. Option B is incorrect because companies with a small amount of debt relative to equity may not necessarily need to sell preferred stock. Option C is also incorrect as the tax advantage of preferred dividends over common share dividends is not a primary reason why companies sell preferred stock.

Preferred Stock Is Often Sold by Companies