Question

Preferred stock has characteristics of both debt and common stock. Which characteristics of preferred stock resemble that of common stock?

Group of answer choices

Preferred and common dividends are not tax deductible expenses; preferred and common stock both carry voting rights

Preferred and common stock both carry voting rights; preferred and common dividends are equally stable and are at management’s discretion

Preferred and common stock are classified as a Liability on balance sheet; preferred and common dividends are not tax deductible expenses

Preferred & common dividends are not tax deductible expenses; both preferred & common stock are classified as “Shareholder Equity” on balance sheet; preferred & common stock have infinite maturities; both pay dividends at management’s discretion

Answer 1

The correct statement is

Preferred and common dividends are not tax deductible expenses; preferred and common stock both carry voting rights

Preferred stock has some features of common stock and some of Debt, and hence, these are also known as hybrid securities

Preferred stock and common stock dividends are not tax deductible

They both carry voting rights

Dividends of common stock are at management discretion. Dividend on preferred stock is fixed like debt

They are classified as Equity

Preferred stock has fixed maturity