Financial Reporting and Analysis

CFA Level I FRA
#1

Can someone assist, is preferred stock considered as part of Debt or Equity in the debt to equity ratio?

#2

Equity.

#3

Thanks

#4

You’re welcome.

#5

I don’t have a curriculum-correct answer.

But in practise, you look at the instrument features - which way the instrument is leaning towards more. Debt or Equity. Also refer the GAAP treatment. I believe under IFRS it is debt under certain circumstances.

Generally Equity must be unfettered. The more T&C you add, it moves away from equity. This sort of perspective is relevant if you are doing discounted free cashflows.