Characteristics of Preferred and Common Stocks

Front

What is preferred stock often referred to as?

Back

A hybrid security because it has characteristics of both common stock and bonds.

Front

What is a key characteristic of preferred stocks regarding multiple series?

Back

A company can issue more than one series of preferred stock, each with different characteristics.

Front

What priority does preferred stock have over common stock?

Back

Preferred stock has priority over common stock regarding dividend payments and claims on assets in bankruptcy.

Front

What are cumulative dividends in preferred stocks?

Back

All past, unpaid preferred stock dividends must be paid before any common stock dividends are declared.

Front

What do protective provisions in preferred stocks restrict?

Back

They restrict the payment of common stock dividends if sinking-fund payments are not met or if the firm is in financial difficulty.

Front

What is convertibility in preferred stocks?

Back

Convertible preferred stock can be converted into a predetermined number of shares of common stock at the holder's discretion.

Front

What are retirement provisions in preferred stocks?

Back

Issuing firms generally provide for some method of retiring the stock, such as a call provision or sinking fund provision.

Front

What does common stock represent?

Back

Ownership in a corporation.

Front

What rights do common stockholders have?

Back

They have ownership rights in proportion to their share of the company.

Front

What is a residual claim on income for common shareholders?

Back

Common shareholders have the right to residual income after bondholders and preferred stockholders have been paid.