From the issuing firm's point of view, one advantage of preferred stock over bonds is
A) preferred dividends are a deductible expense for tax purposes.
B) preferred voting privileges concentrate power in the hands of managers and major shareholders.
C) a dividend payment can be skipped without triggering bankruptcy.
D) all of the above

Question

Quizplus · Accepted Answer

Preferred stock dividends can often be skipped without triggering bankruptcy, which is not the case for bond interest payments. While preferred dividends are not tax deductible, this is not necessarily an advantage from the issuing firm's perspective. Managerial power and voting privileges are not necessarily an advantage of preferred stock over bonds either.

From the Issuing Firm's Point of View, One Advantage of Preferred