Sunday, April 13, 2008

Reasons Companies Issue Preferred Stock

Why do companies issue preferred stock?

  • To raise capital without sacrificing control of company to outsiders
  • To boost the returns earned by common stockholders through using financial leverage.
  • To appeal to investors who believe the common stock is risky or that the expected return on common stock is too low for their needs.

Additional Examples:

Calculate Preferred Stock Value

What is Financial Leverage?

Degree of Financial Leverage

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