How Do You Spell PREFERRED SHARES?
Pronunciation: [pɹɪfˈɜːd ʃˈe͡əz] (IPA) 
Pronunciation: [pɹɪfˈɜːd ʃˈe͡əz] (IPA)
Preferred shares, also known as preference shares or preferred stock, refer to a type of ownership in a company that provides certain privileges and preferences to its holders. These shares represent ownership in a company and entitle shareholders to a fixed dividend payment before any amount is paid to common shareholders in the event of profits or liquidation.
Unlike common shares, preferred shares do not generally provide voting rights in the company's decision-making process. However, they offer a higher claim on company assets and income than common shareholders. These shares often have a stated par value, which represents the initial investment of the shareholder.
The key distinguishing feature of preferred shares is the fixed dividend payment that is usually determined at the time of issuance. These dividends are often paid at regular intervals and are generally fixed or have a predetermined method of calculation. This characteristic makes preferred shares more akin to bonds or debt securities rather than common equity.
In the event of liquidation or bankruptcy, preferred shareholders have higher priority over common shareholders in receiving the remaining assets of the company. This preference is typically granted in terms of payment of dividends and return of capital investment.
Preferred shares are often deemed less risky than common shares due to their preferential rights, fixed dividend payments, and higher priority in liquidation. Investors seeking more stable income and capital preservation may prefer investing in preferred shares, although they generally do not offer the same potential for capital appreciation as common shares.
The etymology of the term "preferred shares" can be traced back to the Latin word "praeferre", which means "to carry in front" or "to prefer". The word "preferred" is derived from the past participle of "praeferre", indicating something that is given a higher priority or preference. In the context of finance and stocks, "preferred shares" refer to a class of shares that hold certain preferential rights and privileges over common shares, such as priority in receiving dividend payments or distribution of assets in the event of liquidation.
