Preferred Stock

(noun)

Stock with a dividend, usually fixed, that is paid out of profits before any dividend can be paid on common stock and that has priority to common stock in liquidation.

Related Terms

Examples of Preferred Stock in the following topics:

  • Owners' Equity

    • Ownership equity may include common stock, preferred stock, retained earnings, treasury stock, and reserve.
    • In an accounting context, shareholders' equity (or stockholders' equity, shareholders' funds, shareholders' capital or similar terms) represents the remaining interest in assets of a company, spread among individual shareholders of common or preferred stock.

  • Net Income

    • Often, the term income is substituted for net income, yet this is not preferred due to the possible ambiguity.
    • The items deducted will typically include tax expense, financing expense (interest expense), and minority interest.Likewise, preferred stock dividends will be subtracted too, though they are not an expense.
    • Net income can be distributed among holders of common stock as a dividend or held by the firm as an addition to retained earnings.
    • Often, the term "income" is substituted for net income, yet this is not preferred due to the possible ambiguity.

  • Equity Finance

    • The equity, or capital stock (or stock) of a business entity represents the original capital paid into or invested in the business by its founders.
    • Ownership of shares is documented by the issuance of a stock certificate.
    • Stock typically takes the form of either common or preferred.
    • Preferred stock differs from common stock in that it typically does not carry voting rights but is legally entitled to receive a certain level of dividend payments before any dividends can be issued to other shareholders.
    • Such providers are usually rational and prudent preferring safety over risk.

  • Publicly Held Corporations

    • It is partially owned by the government because all its preferred stock is under government ownership while its common stock is held by the public.
    • However, the line beyond which a corporation must be considered "state-owned" is unclear, as governments can also own regular stock and have no special influence over business.

  • Performance per Share

    • The below ratios describe the value of shares of stock to stockholders, both in terms of dividends and their general ownership value:
    • Earnings Per Share (EPS) is the amount of earnings per each outstanding share of a company's stock.
    • Dividend Yield ratio shows the earnings distributed to stockholders related to the value of the stock, as calculated on a per-share basis.
    • Investors seeking high current income and limited capital growth prefer companies with a high dividend payout ratio.
    • However, investors seeking capital growth may prefer a lower payout ratio, because capital gains are taxed at a lower rate.

  • Ethical Issues at an Organizational Level

    • Discrimination by age (preferring the young or the old), gender, sexual orientation, race, religion, disability, weight, and attractiveness are all ethical issues that the HR manager must deal with.
    • Enron's unethical practices led to their employees and shareholders losing billions of dollars as their stocks became worthless by November of 2001.

  • Inventory Management

    • In the U.S. and Canada, inventory has become the equivalent of the British term stock; that is, it refers to material that is available from and stocked by a business.
    • In the context of accounting, inventory or stock is considered an asset.
    • Inventory management tracks the shape and percentage of stocked goods.
    • Management of inventories, aimed primarily at determining and controlling stock levels within the physical distribution system, serves to balance the need for product availability against the need for minimizing stock holding and handling costs.
    • Inventory management is primarily concerned with specifying the shape and percentage of stocked goods.

  • US legal issues

    • States and federal agencies regulate financial activities and reporting requirements that are categorized by the number of shareholders and whether their shares are available to purchase and sell on public stock exchanges.
    • In the United States, the Limited Liability Company (LLC) is the entity of choice for the owner or owners who prefer the limited liability afforded by a corporation and a tax treatment that allows profits to flow from the business to the owner or owners.
    • Given your personality and past experience, do you prefer working in a flat or tall organization and why?

  • Forms of Financial Compensation

    • Different companies offer different types of stock options to their employees, allowing them to buy company stock at a discounted price.
    • Different companies offer different types of stock options to their employees, allowing them to buy company stock at a discounted price.
    • An employee stock option (ESO) is a call option on the common stock of a company, granted by the company to an employee as part of the employee's remuneration package.
    • Employee stock options are mostly offered to management as part of their executive compensation package.
    • Employee stock options are similar to warrants, which are call options issued by a company with respect to its own stock.

  • Product Line

    • Brand extension: Strong brand preference allows the company to introduce the related product under the brand umbrella.