Preferred Stock Example – Preferred Stock Dividend

Preferred stock dividend example problem will discuss the process for determining the amount of a dividend to be paid to the preferred stock holders as compared to the common stock holders. Preferred stock holder get paid before common stock holders but have a limit to the amount they will receive. In a corporation the board of directors can determine the amount of dividend to give but has less control over how it will be distributed. Any dividend decided on will generally need to be paid first to the preferred stock holders before going to the common stock holder. The preferred stock holder typically to not have voting writes in the company.
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Preferred Stock Introduction – What is Preferred Stock?

Preferred stock can be misleading because the name preferred stock makes it sound better on all ways t the more traditional common stock. In reality the type of stock we would prefer to have depends on circumstance. The reason preferred stack is called preferred is because it preferred stockholder have first clam to things like dividends or payment on liquidation of a company. However the amount of dividend and payment is limited to the terms of the preferred stock. Common stock will not receive dividends until the preferred stock holders are paid but if the dividends paid are large common stockholders may get paid more. In other words, preferred stock provides more protection against loss by allowing for a primary claim to assets over common stockholders, but common stockholder may be looking for long term growth and will typically benefit if there is long term growth. For more accounting information see website.…