decrease its profitability ratios which might make it less popular of an investment. Issuing preferred stock would be better because it would raise capital, just as intended, without taking on any liabilities. Also, although preferred stocks have fixed dividends a company can still withhold dividends. There is no legal right to a preferred stockholder to receive those dividends in specified periods (Wahlan, Jones, and Pagach, 2017). If Peyton needed to withhold dividends from the preferred stockholders to wait for its capital to break-even, then it would be able to do so. Peyton Approved currently has a deferred tax liability and tax expense of $50,325.25. This is a result of using straight-line depreciation for its financial accounting and Modified Accelerated Cost Recovery System (MACRS) for its tax accounting. This amount may not be the actual amount to be paid, however. If the tax structure is changing, then these deferred tax accounts, whether they are assets, liabilities, or expenses, will need to be changed in accordance (Cengage). If the change is that the income tax has increased, then this will have a negative impact on Peyton because it will owe more tax than it is currently accounting for, and vice-versa. 6
References Cengage. (n.d.). Accounting for Deferred Income Taxes. Retrieved from Corporate Finance Institute. (n.d.). Other Comprehensive Income - Overview, Examples, How it Works. Retrieved from - income/ Gleeson, P. (2017, November 21). Disadvantages of a Company Financing in Preferred Stock. Retrieved from - stock-70180.html Hayes, A. (2017, October 10). Ratio Analysis: Using Financial Ratios. Retrieved from Scatizzi, C. (2009, February). Convertible Bonds. Retrieved from The Economic Times. (n.d.). Definition of Debt Finance | What is Debt Finance ? Debt Finance Meaning. Retrieved from Wahlan, J. M., Jones, J. P., & Pagach, D. P. (2017). Intermediate Accounting: Reporting and Analysis (2nd ed.). Cengage Learning. Weiss, A. D. (2014). Raising Capital Through Convertible Preferred Stock Offerings. Retrieved from 7
Yum, J. (2017, April 06). How Convertible Bonds Work in Early Stage Venture Capital. Retrieved from - venture-capital-d5746cd11d27 8
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