Question

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 ^_^

Answer 1

i think its preferred
what do you think?

Answer 2

I'm thinking that it's either that or common stock. I'm still looking though.

Answer 3

ok, thanks

Answer 4

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.

Answer 5

so, its common?

Answer 6

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)

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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

Answer 7

yeah it's common

Answer 8

i thought for sure that it was preffered though XD i guess i was wrong

Answer 9

thanks again ^_^

Answer 10

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

Answer 11

so it's a bit strange why even bother with preferred stock and why not just go with bonds

Answer 12

ok, i think i get it now

Answer 13

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)

Answer 14

ok, well, i got the answer now, and i understand it now, so thanks again ^_^

Answer 15

no problem

Answer 16

im gonna go ahead and close this now ^_^