Preferred stock is like long-term debt in that ________.
A) it gives the holder voting power regarding the firm's management
B) it promises to pay to its holder a fixed stream of income each year
C) the preferred dividend is a tax-deductible expense for the firm
D) in the event of bankruptcy preferred stock has equal status with debt

Question

Quizplus · Accepted Answer

Preferred stock is sometimes referred to as a hybrid security because it has characteristics of both equity and debt. One key similarity between preferred stock and long-term debt is that both promise to pay their holders a fixed stream of income each year. This fixed payout is known as a dividend for preferred stock and interest for long-term debt.

Preferred Stock Is Like Long-Term Debt in That ________