Question

1. Why would a company issue preferred stock over common stock?'

Answer 1

The following are the primary reasons why a company issue preferred stock over common stock:
1. Lack of voting Right- lack of voter rights for preference shareholders places the company in a strength position, by letting it retain more control.
2. Flexibility- Companies can issue callable preference shares, which affords them the right to repurchase shares at their discretion.
3. Low Debt-to-Equity Ratios- Issuing preferred shares can help a company achieve a lower debt-to-equity ratio compared to issuing debt bonds.