Why do investors in new ventures prefer to take preferred stock in a venture instead of common stock?
A) Because preferred shareholders get paid dividends before common shareholders
B) Because preferred stock is much cheaper
C) Because preferred stock is always worth double common stock
D) Because preferred stock is easier to sell

Question

Quizplus · Accepted Answer

Investors prefer to take preferred stock in a venture instead of common stock because preferred shareholders get paid dividends before common shareholders. This provides a greater sense of security for the investor and makes the investment appear more desirable.

Why Do Investors in New Ventures Prefer to Take Preferred