If a company is thinking about issuing preferred stock to raise capita

QUESTION

If a company is thinking about issuing preferred stock to raise capital, what are some factors that it should consider? What factors should an investor consider before buying preferred stock?

2) If dividend is cumulative or not, preferred stock holders always prefer cumulative dividend.

1) What type of preferred stock must be issued i.e. cumulative or non-cumulative, participating or non-participating, convertible or non-convertible? Each type of preference stock has its own advantages and disadvantages, therefore firm must analyze each type of preference share and must choose the best type of security based on the existing conditions.

ANSWER:

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