Which of the following statements best describes preferred stocks?

Question

Quizplus · Accepted Answer

Preferred stocks are generally considered less risky than common stocks because they have a fixed dividend rate and a higher priority in receiving dividend payments and assets in the event of bankruptcy. However, they do not have voting rights like common stocks. Option A is incorrect as preferred stockholders have priority over bondholders in both income and liquidation proceeds. Option C is incorrect as preferred dividends are often cumulative, meaning if a company skips a dividend payment, they will owe it to the preferred stockholders in the future. Option D is incorrect as dividends on preferred stocks are not tax deductible for the issuing corporation.

Which of the Following Statements Best Describes Preferred Stocks