Why Do Companies Tend to Issue Preferred Stock Less Then

question 84

Multiple Choice

Why do companies tend to issue preferred stock less then commons stock and bonds?

• A) Flotation cost of preferred stock is low compared to bonds.
• B) Preferred dividends are considered regular (fixed)obligations but are not tax-deductible.
• C) Preferred shareholders are entitled to receive stipulated dividends before common shareholders.
• D) Preferred stock typically has cumulative dividends.

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Definitions:

Investment

The allocation of resources, usually money, in order to gain profitable returns as interest, income, or appreciation in value.

Workers

Individuals who perform tasks or jobs for pay, ranging from manual labor to professional occupations.

Units

In economics, units refer to the quantifiable measures used to express the quantity of an item, such as pieces, kilograms, liters, etc., used in transactions or production.

Total Cost

The complete cost of production, encompassing both fixed and variable costs, for a good or service.