With respect to preferred stock:
A) it is an obligation and must be paid before debt.
B) it is similar to long- term debt.
C) shareholders are paid a dividend based on net income.
D) the dividends paid are tax deductible to the firm.

Question

Quizplus · Accepted Answer

Preferred stock is similar to long-term debt in that it typically provides a fixed dividend payment, similar to the fixed interest payments of long-term debt. However, unlike debt, preferred dividends are not legally obligatory, and failure to pay them does not result in bankruptcy.

With Respect to Preferred Stock