perferred stock differs from common stock in thay prefrred stock: Which 1 a. usually has a maturity date. b. can never be called. dividends are generally fixed in amount. c. dividends are deductible for tax purposes.
To determine the preferred characteristics of preferred stock compared to common stock, we can break down the options provided:
a. Preferred stock usually has a maturity date:
Preferred stock is typically issued with a fixed maturity date, after which the company can redeem the shares from the investors. This distinguishes it from common stock, which does not have a specific maturity date.
b. Preferred stock can never be called:
Preferred stock can indeed be callable, meaning the company has the option to call back or redeem the shares at a specific price before the maturity date. However, it is important to note that not all preferred stock is callable, and the terms of the specific issuance need to be considered.
c. Preferred stock dividends are generally fixed in amount:
One of the main features of preferred stock is that it pays fixed dividends to shareholders. Unlike common stock, where dividends can fluctuate based on the company's performance and decisions, preferred stock generally has a predetermined dividend amount.
d. Preferred stock dividends are deductible for tax purposes:
This statement is incorrect. Dividends paid on both preferred and common stock are typically not deductible for tax purposes by the company. This is a general rule applying to most jurisdictions, although tax laws can vary.
Based on the given options, the correct answer is:
Preferred stock dividends are generally fixed in amount (option b).