TeachMeFinance.com - explain preferred stock
preferred stock -- a stock that yields a fixed-dollar income. The stock represents equity, or ownership, in the company but generally carries no voting rights. The stockholder has a claim to the issuing firm's earnings and assets ahead of the holder of common stock, but behind the holder of a bond.
Preferred stock -- Stock that is preferred as to dividends and assets; it must receive a dividend before a dividend can be paid on the common stock and in a distribution of assets it participates ahead of the common stock. Cumulative preferred stock is stock the dividends on which, if not paid regularly or in full, accumulate and must be paid in the future before a dividend can be paid on the common stock. Preferred stock is the English designation for preferred ordinary (common) stock. When for dividend purposes the ordinary stock of a company has been divided into two pares called preferred or "B" stock and deferred or "A" sto'ck the dividend on the A stock is deferred until a fixed amount has been paid on the B stock. This B or preferred stock is not the same as preferred stock in the United States. What in the United States is called preferred stock is in Great Britain called preference stock and preference stock in Great Britain may be divided into two or more classes called first preference, second preference, etc., just as preferred stock in the United States may be divided into two or more classes called first preferred, second preferred, etc. When, however, there is but one class of preference stock ahead of an ordinary stock in Great Britain the B or preferred stock is equivalent to second preferred stock in the United States. Preference stock is sometimes divided into classes, as first preference, second preference, etc., with the right to dividends in the order named.
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