What is the primary advantage of issuing Preferred Stock over Common Stock for corporate managers?
APreferred stock imposes mandatory maturity repayment obligations
BAvoids diluting common equity voting control while providing fixed dividends
CPreferred shareholders hold primary voting rights
DPreferred dividend payments are tax-deductible expenses
Explanation
* Preferred stock usually lacks voting rights, allowing equity fundraising without diluting voting control of common shareholders.
* Preferred dividends are NOT tax-deductible (unlike bond interest).
* Hybrid security combining features of equity and fixed-income debt.
Exam Relevance
- Topic: Corporate Finance
- Subtopic: Equity Securities
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