In Defense of Preferred Stock.

The article examines the decline in preferred stock as a source of corporate finance from the middle 1950s to the early 1960s, noting that retained earnings and straight debt were popular funding measures. The author argues that corporations should reconsider preferred stock a method of financing expansion. The article explores questions arising from preferred stock, such as limits on investment, protecting shareholder interest, taxation positions and dividend increases. The author provide models for deciding between the use of preferred stock, retained earnings or debt. INSET: SHOULD OUTSTANDING PREDERRED BE RETIRED?.