Preferred shares may be issued instead of common shares:
A) To prevent dilution of voting ownership.
B) To increase the return earned by common shareholders.
C) To appeal to investors who believe that common shares are too risky.
D) To increase financial leverage.
E) All of these answers are correct.

Question

Quizplus · Accepted Answer

Preferred shares can be issued for all the reasons mentioned: to prevent dilution of voting ownership (A), to increase the return for common shareholders by using less equity (B), to attract investors who find common shares too risky (C), and to increase financial leverage by using preferred shares as a form of financing (D).

Preferred Shares May Be Issued Instead of Common Shares