Preferred share is like long-term debt in that ________.
A)it gives the holder voting power regarding the firm's management
B)it promises to pay to its holder a fixed stream of income each year
C)the preferred dividend is a tax-deductible expense for the firm
D)in the event of bankruptcy preferred share has equal status with debt

Question

Quizplus · Accepted Answer

Preferred shares promise to pay a fixed stream of income each year to its holders, similar to the interest paid on long-term debt. A is incorrect because voting power is typically reserved for common shareholders. C is incorrect because dividends on preferred shares are not tax-deductible for the firm. D is incorrect because in the event of bankruptcy, preferred shares rank below debt in terms of priority for payment.

Preferred Share Is Like Long-Term Debt in That ________