Stock

Examples of Stock in the following topics:

• Preferred Stock

  • Preferred stock usually carries no voting rights, but may carry a dividend, have priority over common stock upon liquidation and/or have other benefits.
  • In other words, in the case of liquidation or bankruptcy, preferred stock will have claim to assets before common stock, but after corporate bonds or other debt instruments.
  • Preferred stock usually carries no voting rights, but may carry a dividend and may have priority over common stock in the payment of dividends and upon liquidation.
  • Some examples are prior preferred stock (highest priority), preference preferred stock, convertible preferred stock (exchangeable for common stock), cumulative preferred stock, exchangeable preferred stock, participating preferred stock, putable preferred stock, monthly income preferred stock, and non-cumulative preferred stock.
  • Preferred Stocks are considered a hybrid security with properties of both stocks and bonds, but are subordinate to bonds when it comes to rights of claim to company assets.

• Accounting for Preferred Stock

  • Preferred stock is a class of capital stock that carries certain features or rights not carried by common stock.
  • When a corporation issues both preferred and common stock, the preferred stock may be:
  • Stock preferred as to assets is preferred stock that receives special treatment in liquidation.
  • Convertible preferred stock is preferred stock that is convertible into common stock of the issuing corporation.
  • Convertible preferred stock is uncommon, most preferred stock is nonconvertible.

• Convertible Stock

  • This type of stock has an embedded option that allows it to be converted into a specified number of shares of common stock at a predetermined price; usually at a premium over the stock's market price.
  • Unlike common stock, preferred shares usually have no voting rights.
  • Preferred stock is reported in the stockholder's equity section as the number of shares outstanding, multiplied by the stock's market price.
  • The result is divided between the value of the shares that fall under "common stock - par value" and the excess value over par is reported as "common stock - additional paid-in-capital".
  • A public company's preferred stock is designated as convertible if it can be exchanged for common stock.

• The Cost of Preferred Stock

  • The cost of preferred stock is equal to the preferred dividend divided by the preferred stock price, plus the expected growth rate.
  • The price of a preferred stock is $100.
  • The cost of preferred stock is 13%.
  • This tells us that the cost of preferred stock is equal to the preferred dividend divided by the preferred stock price, plus the expected growth rate.
  • The cost of preferred stock is equal to the preferred dividend divided by the preferred stock price, plus the growth rate.

• Treasury Stock

  • Treasury stock is a company's issued and reacquired capital stock; the stock has not been retired and is legally available for reissuance.
  • Treasury stock is the corporation's own capital stock it has issued and then reacquired.
  • Because this stock has not been canceled, it is legally available for reissuance and cannot be classified as unissued stock.
  • When the stock is resold, treasury stock is credited for the par value of the stock sold.
  • Companies that issue common stock and reacquire it in the future, reclassify it as treasury stock.

• Common Stock

  • Common stock is a form of ownership and equity, different from preferred stock, that still earns rights of ownership for its shareholders.
  • "Common stock" is used primarily in the United States.
  • It is called "common" to distinguish it from preferred stock.
  • If both types of stock exist, common stock holders cannot be paid dividends until all preferred stock dividends (including payments in arrears) are paid in full.
  • Stocks can be bought and sold on exchanges, like the New York Stock Exchange shown above.

• Common and Preferred Stock

  • That being said, holders of this type of stock usually do not have voting rights, while common stock holders do.
  • In general, there are four different types of preferred stock: cumulative preferred stock, non-cumulative preferred stock, participating preferred stock, and convertible preferred stock.
  • Convertible preferred stock are preferred issues which holders can exchange for a predetermined number of the company's common-stock shares.
  • It is a one-way deal, and an individual cannot convert the common stock back to preferred stock, if they have already exchanged their preferred stock with the company.
  • Participating preferred stockholders can "double dip", and are entitled to both their money back, as well as the leftovers for common stock, proportionate to the amount of common stock for which their preferred stock can be converted into.

• Preferred Stock Rules and Rights

  • Preferred stock usually carries no voting rights, but may carry a dividend and may have priority over common stock in the payment of dividends and upon liquidation.
  • Preferred stock is a special class of shares that may have any combination of features not possessed by common stock.
  • Preferred stock has a claim on liquidation proceeds of a stock corporation equal to its par (or liquidation) value, unless otherwise negotiated.
  • Preferred stock may also have rights to cumulative dividends.
  • Preferred stock is a security ( a little more modern that this stock from the VOC or Dutch East India Company) that carries certain rights which designate it from common stock or debt.

• Dividend Preference

  • If a corporation issues only one class of stock, this stock is common stock.
  • Preferred stock is a class of capital stock that carries certain features or rights not carried by common stock.
  • Within the basic class of preferred stock, a company may have several specific classes of preferred stock, each with different dividend rates or other features.
  • It is called "common" to distinguish it from preferred stock.
  • If both types of stock exist, common stock holders cannot be paid dividends until all preferred stock dividends (including payments in arrears) are paid in full.

• Claim to Income

  • In the cases of bankruptcy and dividend distribution, preferred stock shareholders will receive assets before common stock shareholders.
  • In the event of bankruptcy, common stock investors receive any remaining funds after bondholders, creditors (including employees), and preferred stock holders are paid.
  • Preferred stock also has the first right to receive dividends.
  • Preferred stock has a claim on liquidation proceeds of a stock corporation equal to its par (or liquidation) value, unless otherwise negotiated.
  • This will be different to common stock shareholders and preferred stock shareholders because of the different prices and rewards based on holding these different kinds of shares.