An advantage of preferred stock financing is preferred ______.
A) stockholders can vote for the Board of Directors and be an integral part of the direction of the company
B) stock dividends are tax-deductible for the investor
C) stock dividends are flexible, and the penalties for not paying a dividend are not severe
D) stock is the most preferred method of raising capital

Question

Quizplus · Accepted Answer

One advantage of preferred stock financing is that the dividends are flexible, and the penalties for not paying a dividend are not severe. This provides the company with more financial flexibility in managing its cash flow while still providing investors with a steady stream of income. Option A is incorrect because preferred stockholders typically do not have voting rights. Option B is incorrect because stock dividends are not tax-deductible for the investor. Option D is incorrect because preferred stock is not necessarily the most preferred method of raising capital, as it depends on the specific circumstances of the company and its investors.

An Advantage of Preferred Stock Financing Is Preferred ______