BU283 Lecture 10: Stocks Part 1
Document Summary
Stocks 1: voting rights/ownership, ceo i(cid:373)ple(cid:373)e(cid:374)ts boa(cid:396)d of di(cid:396)e(cid:272)to(cid:396)s" st(cid:396)ategies, entitled to cash flow of the business (dividends) If the company goes bankrupt: first people to get paid government (taxes, second trustees, bondholders, preferred shareholders. If the(cid:396)e"s (cid:373)o(cid:374)ey lefto(cid:448)e(cid:396), it"ll go to (cid:272)o(cid:373)(cid:373)o(cid:374) sha(cid:396)eholde(cid:396)s: (cid:862)residual (cid:272)lai(cid:373)a(cid:374)ts(cid:863) o(cid:374)ly getti(cid:374)g lefto(cid:448)e(cid:396)s, so(cid:373)eti(cid:373)es (cid:374)ot e(cid:374)ough to cover what they paid. Benefits of preferred shareholders: guaranteed fixed dividends, level perpetuity dividends going on forever, use pv of perpetuity formula. Investment goes in the form of equity not debt (like bonds: e(cid:395)uity holde(cid:396)s (cid:272)a(cid:374)"t fo(cid:396)(cid:272)e the(cid:373) i(cid:374)to (cid:271)a(cid:374)k(cid:396)upt(cid:272)y (cid:449)he(cid:396)eas (cid:271)o(cid:374)dholde(cid:396)s (cid:272)ould take legal action, straight vs. Cumulative dividend: cumulative: if company cant make dividend payment this year, roll it to the next year. If the (cid:272)o(cid:373)pa(cid:374)y does(cid:374)"t (cid:373)ake pay(cid:373)e(cid:374)ts, p(cid:396)efe(cid:396)(cid:396)ed sha(cid:396)eholde(cid:396)s get priority and they must get their payment before common shareholders: perpetuity: anything that goes on forever.
