Preferred Stock Is NOT Similar to Debt Because

question 149

Multiple Choice

Preferred stock is NOT similar to debt because:

• A)preferred dividends are not tax-deductible whereas interest expense is tax-deductible.
• B)preferred dividends do not have to be paid whereas interest expense must be paid.
• C)preferred stock does not have a maturity date whereas debt usually has a maturity date.
• D)all of the above.

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Definitions:

Consumption

The usage of goods and services by households, including the actions of selecting, purchasing, using, and disposing of products.

Double Taxation

The levy of tax by two or more jurisdictions on the same declared income (in the case of income taxes), asset (in the case of capital taxes), or financial transaction (in the case of sales taxes).

Tax Base

The assessed value of all taxable income, property, assets, or other items that a government can tax.

Income Tax

A tax levied by governments on individuals or entities based on their income or profits.