Preferred Shares Are Often Referred to as Hybrid Securities-A Hybrid

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The Answer is The features of a preferred share that make it resemble debt are that it normally has a fixed payment dividend associated with it that is similar to interest on debt. It also does not vote, like debt, and it has priority in the event of liquidation ahead of common shareholders, but behind debt.
Reasons for issuing preferred shares include:

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They enable a company to raise capital without having to dilute ownership interests of common shareholders

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Dividends can be postponed in periods of financial difficulty

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Provides new capital to a company while improving the debt to equity ratio

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Does not result in the dilution of future earnings as preferred shareholders would only be entitled to their fixed or stated dividend amount regardless of any increase in earnings.

Preferred Shares Are Often Referred to as Hybrid Securities-A Hybrid

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Preferred Shares Are Often Referred to as Hybrid Securities-A Hybrid

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Correct Answer:VerifiedShow Answer

Correct Answer:
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