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Answer (D) is correct . For a financial manager, preferred stock is preferable to debt because dividends do not have to be paid on preferred stock, but failure to pay interest on debt could lead to bankruptcy. Thus, preferred stock is less risky than debt. However, debt has some advantages over preferred stock, the most notable of which is that interest payments are tax deductible. Preferred stock dividends are not.

Answer (A) is incorrect because Preferred dividends are viewed as fixed payments since they must be made before any dividends or distributions in liquidation can be made to common shareholders.
Answer (B) is incorrect because It states a reason to issue debt, not preferred stock.
Answer (C) is incorrect because In the sense that they cannot be avoided, interest payments are cumulative.