anonymous
  • anonymous
What type of stock receives an equal part of the profits on each share to be distributed after all other obligations of a company have been satisfied? A. Common B. Cumulative preferred C. Preferred D. No-par i will give a medal ^_^
Mathematics
jamiebookeater
  • jamiebookeater
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anonymous
  • anonymous
i think its preferred what do you think?
jim_thompson5910
  • jim_thompson5910
I'm thinking that it's either that or common stock. I'm still looking though.
anonymous
  • anonymous
ok, thanks

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jim_thompson5910
  • jim_thompson5910
Ok so I'm reading that preferred stock holders get a fixed amount of dividends. That's a good thing if you are a preferred stock holder. However, if the net earnings of the company goes up, then the preferred dividend amount does NOT go up. It's set at a fixed amount. So you'd go for preferred stock if you have a fear the earnings may go down. If you think their earnings will go up, go for common stock. If a common stock has dividends, the those dividends will increase as the earnings increases.
anonymous
  • anonymous
so, its common?
jim_thompson5910
  • jim_thompson5910
Preferred Stock pros: you lock in a fixed dividend good for when you want income, even if the company isn't performing well cons: the fixed dividend does not increase if the company does better no voting rights (it's similar to debt, rather than equity) ------------------------------------------------------------------- Common Stock pros: the dividend usually increases if the company does better (assuming dividends are issued) there are voting rights cons: if preferred stock holders don't get dividends, then neither do common stock holders if company's earnings go down, then dividends likely go down too http://www.accountingcoach.com/stockholders-equity/explanation/7
jim_thompson5910
  • jim_thompson5910
yeah it's common
anonymous
  • anonymous
i thought for sure that it was preffered though XD i guess i was wrong
anonymous
  • anonymous
thanks again ^_^
jim_thompson5910
  • jim_thompson5910
preferred stock is a lot like debt they issue "dividends" which essentially is an interest payment because it's based on the par value. It's a fixed amount that doesn't change based on the earnings
jim_thompson5910
  • jim_thompson5910
so it's a bit strange why even bother with preferred stock and why not just go with bonds
anonymous
  • anonymous
ok, i think i get it now
jim_thompson5910
  • jim_thompson5910
Oh I'm reading that a bond has higher precedence than a preferred stock. So if a company goes belly up, then the bond holders get paid first (so that may explain why bond holders have a lower rate)
anonymous
  • anonymous
ok, well, i got the answer now, and i understand it now, so thanks again ^_^
jim_thompson5910
  • jim_thompson5910
no problem
anonymous
  • anonymous
im gonna go ahead and close this now ^_^

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