For purposes of measuring a firms leverage, should preferred stock?
In my experience, the majority of the times pref stock is classified as equity: it is a subordinated, non-cash paying, unsecured instrument. How people look at it depends primarily on their position in the cap structure vis a vis the pref equity piece (to answer the second part of your question): Creditors (i.e. senior lenders) see the pref stock as equity. Lenders have a senior claim on the business and the pref stock should not impact their position / returns Equity investors (i.e. common equity holders) could consider the pref stock almost as debt because it ranks ahead of them. Most of the time, the pref is structured in a way that it gets paid before the common equity sees any profits / benefits from the increased equity value Finally, the management team, to the extent they are common equity investors, the above applies. If you mean how the management team sees the pref when operating / thinking about the business, then the answer is more like equity. The company does not have to pay cash interest on the pref stock, unlike debt that triggers a default when its interest is not paid. Then, of course, the management team has to run the business in a way to generate value for both the pref equity and common equity holders. I tried to keep the answer as simple as I could. Hopefully it clarifies your point, but I appreciate this could get complicated!