Question

An analyst should treat preferred stock on a firm's balance sheet as debt when calculating leverage ratios if the preferred stock is: a. callable by the issuer. b. issued at a variable dividend rate. c. redeemable by shareholders. d. convertible into common stock.

Answer 1

C. redeemable by shareholders

Step-by-step explanation:

Redeemable preferred stock can be regarded as type of stock which give room for issuer in order for him/ her to buy back a particular stock at a particular price as well as retire it , so that the stock is been converted to treasury stock, one reason for treatment of preferred stock as debt instead of equity is that it behave like bond that that of a bond.It should be noted that An analyst should treat preferred stock on a firm's balance sheet as debt when calculating leverage ratios if the preferred stock is redeemable by shareholders.