The main reason for the small amount of financing with preferred stock is that dividends on preferred stock are not tax deductible as are interest paid on bonds.

Question

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This statement is true. Unlike interest paid on bonds, which is tax deductible for the issuer, dividends paid on preferred stock are not tax deductible. This makes it less attractive for companies to raise financing through preferred stock issuances.

The Main Reason for the Small Amount of Financing with Preferred