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.

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Definitions:

Electronic Circuitry

The interconnected arrangement of electronic components, such as resistors, capacitors, and transistors, that perform a specific function.

Control Voltage

The electrical potential used to power and operate the control circuits of larger electrical systems, typically lower than power circuit voltages.

Digital Input

An input signal to a digital circuit that represents binary levels (0 or 1), used to control or provide data.