Long-term debt in the capital structure

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Preferred stock is used much less than long-term debt in the capital structure of most industrial and merchandising companies principally because:

A: The preferred stock dividend requirement is a fixed claim against income, but interest on long-term debt is not a fixed amount.

B: Preferred stock has a fixed liquidation or redemption value, but long-term debt does not have a fixed maturity value.

C: Preferred stock may be convertible to common stock, but long-term debt cannot be convertible.

D: For income tax purposes, dividends paid on preferred stock are not deductible, but interest on long-term debt is deductible.

Reference no: EM13150007

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