Please discuss the economic and legal differences between holders of common stock, preferred stock and general creditors. Where do they each stand with regard to the payment of dividends and distributions in liquidation?
Here is some information for you regarding the differences between holders of common, preferred stock and general creditors.
Common stock is a piece of paper that represents some degree of ownership of a corporation as well as some form of profit from that particular company. Investors in common stocks receive one vote per stock owned to elect board members, the people who oversee major decisions made for the company as a whole, for a particular company. For example, they can vote on whether to allow a stock split, or whether the objective of the company should be changed. They cannot, however, vote on whether dividends should be distributed. In the long-term, this type of stock means capital growth for the investor, however, if the company goes bankrupt, the ...