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

Question

Quizplus · Accepted Answer

Preferred stock dividends are flexible and the penalties for not paying a dividend are not as severe as they are for failing to pay interest on debt. Therefore, it provides more maneuverability to a company to manage its cash flow, and can be attractive to investors as well. However, preferred stock does not give voting rights, and preferred stock dividends are not tax-deductible for the investor. Preferred stock might not always be the most preferred method of raising capital, it depends on the company's specific circumstances.

An Advantage of Preferred Stock Financing Is