Which of the following statements is CORRECT?
A) The preferred stock of a given firm is generally less risky to investors than the same firm's common stock.
B) Corporations cannot buy the preferred stocks of other corporations.
C) Preferred dividends are not generally cumulative.
D) A big advantage of preferred stock is that dividends on preferred stocks are tax deductible by the issuing corporation.
E) Preferred stockholders have a priority over bondholders in the event of bankruptcy to the income, but not to the proceeds in a liquidation.

Question

Quizplus · Accepted Answer

Preferred stock is considered less risky than common stock because preferred stockholders have a priority over common stockholders in terms of dividend payments and asset distribution in the event of bankruptcy.

Which of the Following Statements Is CORRECT