Preferred Stock is a second class of equity. Preferred shareholders don't have voting rights, but they do have a right to a fixed or adjustable dividend that must be paid before the common stock owners receive dividend. Preferred shareholders also have priority over common shareholders in the event that the company falls into bankruptcy.
Preferred Stock is Functions like debt in that dividends have to be paid out, but unlike the interest paid on debt,which is deductible from pretax income, the dividends paid on preferred stock are not deductible which tends to make issuing preferred share very expensive money.
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