Participating Preferred Stock

Preferred stock is a form of equity issued by a company. It its preferred because it takes priority over common stocks in that it has a higher-priority claim on assets in the event of bankruptcy and will be paid dividends before any common stockholders receive dividends. However, holders of preferred stock will not have any voting rights in the company.

Preferred stock can be thought of as a mixture of debt and equity, similar to convertible bonds. It has more financial power than common stock, but less risk than debt, and is usually higher priced and will rise in price less than both.

Free Resources

To continue learning and advancing your career, check out these additional helpful WSO resources:

• Retained Earnings
• Fraud Triangle
• Accounts Receivable Turnover Ratio
• Marginal Cost Formula
• Nash Equilibrium