Preferred Stock Is Used Much Less Than Long-Term Debt in the Capital

question 19

Multiple Choice

Preferred stock is used much less than long-term debt in the capital structure of most industrial and merchandising companies principally because:

• A)the preferred stock dividend requirement is a fixed claim against income, but interest on long-term debt is not a fixed amount.
• B)preferred stock has a fixed liquidation or redemption value, but long-term debt does not have a fixed maturity value.
• C)preferred stock may be convertible to common stock, but long-term debt cannot be convertible.
• D)for income tax purposes, dividends paid on preferred stock are not deductible, but interest on long-term debt is deductible.

---

Definitions:

Democratic Process

A system of government by the whole population or all the eligible members of a state, typically through elected representatives.

Cooperation

The act of working together towards a common goal or benefit.

Multiculturalists

Advocates or supporters of the view that societies should embrace a diversity of cultures, promoting the equal value of different cultural traditions.

National Unity

The sense of solidarity, cohesion, and pride among the citizens of a nation, fostering a collective identity and support for the nation-state, often emphasized in times of crisis or celebration.