Preferred stock is a form of debt financing because the dividend must be paid before dividends can be paid to the equity owners.

Question

Quizplus · Accepted Answer

Preferred stock is a form of equity financing, not debt financing, because it represents ownership in a company, albeit with a higher claim on assets and earnings than common stock. Dividends for preferred stock are not obligatory in the same way interest payments are for debt.

Preferred Stock Is a Form of Debt Financing Because the Dividend