From a corporation's point of view, a disadvantage of issuing preferred stock is ________.
A) that it increases financial leverage
B) that it has to give fixed payments as well as voting rights to the holders
C) its excellent merger security
D) that the dividends are not tax-deductible

Question

Quizplus · Accepted Answer

Preferred stock dividends are not tax-deductible for the corporation, unlike interest payments on debt, which are tax-deductible. This makes issuing preferred stock less tax-efficient compared to issuing debt.

From a Corporation's Point of View, a Disadvantage of Issuing