BU111 Study Guide - Final Guide: Preferred Stock
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BU111 Full Course Notes
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Document Summary
Hybrid financing: has some features very similar to a bond and some features that make it similar to common stock. Purely discretionary (if they had a bad year, they will not pay, not required like bonds) No date of final maturity: perpetual financing. Sell in secondary market (like common stock), can"t sell back to company (like a bond) Non voting shares: though you become a part owner, you don"t have the right to vote, voting rights traded for preference rights, dividends. Preferred stock holders get first claim of money, before common stock: liquidation rights. Liquidation claims must be paid to preferred stock before common. Preferred stock prices vary inversely with interest rate movements in the economy: for the same reason bond prices behave in this manner. Cumulative feature: if dividends are not declared in a given year, they carry over to the next year.
