Preferred stock:
A)is a type of corporate debt.
B)is treated like debt for tax purposes.
C)is listed in the liabilities section of a balance sheet.
D)has a stated dividend but no stated liquidation value.
E)is treated like equity for both tax and accounting purposes.

Question

Quizplus · Accepted Answer

Preferred stock is considered equity for both tax and accounting purposes, not debt. It does not have the tax-deductible interest payments characteristic of debt, nor is it listed as a liability on the balance sheet. Preferred stock typically has a stated dividend and may have a stated liquidation value, distinguishing it from common equity in terms of payment priority and potential financial benefits.

Preferred Stock