This post addresses types of stock and types of dividends.
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1. What are some similarities and differences between common stock and preferred stock? As a shareholder, would you want preferred or common stock? Explain why. As a corporation, would you rather issue preferred or common stock? Explain why.
2. What are the different types of dividends that a company can pay out? Which type would you prefer? Explain why. When should a company pay dividends? How does a stock dividend differ from a stock split?
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Solution Summary
The solution provides a detailed discussion for each question, explaining the similarities and differences between common stock and preferred stock, the type one would want, and as a corporation, if you would rather issue preferred or common stock. This solution also discusses the different types of dividends, the type one would prefer, and when a company should pay dividends. The difference between a stock dividend and a stock split is also discussed.
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1. What are some similarities and differences between common stock and preferred stock? As a shareholder, would you want preferred or common stock? Explain why. As a corporation, would you rather issue preferred or common stock? Explain why.
Preferred stockholders have a greater claim on the corporation's assets. If the company liquidates, the preferred stockholders are paid before common stockholders, so the chances are better that preferred stockholders will be paid. If the company declares a dividend, the preferred stockholders are paid dividends first. The preferred stockholders are also paid a higher amount of ...
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