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Question:................................................Should the favored./preferred stock be moved to the long haul/term liabilities area(section) of the balance report...

Question:................................................Should the favored./preferred stock be moved to the long haul/term liabilities area(section) of the balance report (sheet)?

Paragraph #1 Why do you think it should be moved? (5-7 sentences)

Paragraph #2 As to why you want to move the long-term liabilities section or not? (5-7 sentences)

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Answer #1

note: I am giving hint , please elaborate

The preferred/ favoured stock is to be redeemed in the future , also before giving dividend to common stockholders dividend is to be given to preferred/favoured stockholders.

to the commom stockholders who are considered the owners of the company, view the dividend and redemption as an obligation like any other debt where the payment is interest and principal.

Borrowing is a cheap source of funds for many companies but a highly geared company is considered a risky investment by the potential investors because such a company has to pay more interest on loans and dividend on preferred stock and, therefore, may have to face problems in maintaining a good level of dividend for common stockholders during the period of low profits.

therefore the preferred stock/favoured stock should be moved to long term liabilities

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