Which of the following best describes preferred stock?

Question

Quizplus · Accepted Answer

Preferred stock represents an equity claim on the assets and earnings of the firm, similar to common stock, but it typically pays out a fixed stream of income (dividends) before any dividends are paid to common stockholders. Unlike an indenture, which is a legal obligation to pay interest on bonds, preferred stock dividends can be suspended in financial distress without the firm facing bankruptcy.

Which of the Following Best Describes Preferred Stock