Question
Should preferred stock be classified as debt or equity? Does it matter if the classification is...
Should preferred
stock be classified as debt or
equity? Does it matter if the classification is made
by the firm’s management, creditors, or equity investors?
Answer must be lengthy!! No Plagiarism!! Plagiarism will be checked!! Answer all parts of question!!
Answers
Preferred stock are equity and not debt, however they have a fixed rate of dividend but still classified as equity in the balance sheet under shareholders equity . Preferred stock carry a fixed rate of dividend but if the company is not having sufficient rpofits or it is facing difficulty of funds it can withold the preference dividend.
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