Preferred Stock May Exist Because

question 28

Multiple Choice

Preferred stock may exist because:

• A) losses before income taxes prevent a company from enjoying the tax advantages of debt interest while there is no tax advantage for preferred dividends.
• B) an advantage exists for the firm; preferred shareholders cannot force the company into bankruptcy because of unpaid dividends.
• C) corporations get a 70% tax exemption on preferred dividends received.
• D) All of these.
• E) None of these.

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Definitions:

Nonfinancial Performance

Evaluation of a company's success based on metrics other than financial gains, such as customer satisfaction or environmental impact.

Discriminatory Pricing

The practice of charging different prices for the same product or service to different consumers, especially in a manner considered unfair or unethical.

Corporate Espionage

The practice of secretly gathering proprietary or confidential information from competitors or other businesses for competitive advantage.

Sustained Price Cuts

A strategic reduction in the prices of goods or services, maintained over a long period, to attract more customers or gain a competitive advantage.