PREFERRED STOCK Meaning and
Definition
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Preferred stock, also known as preference shares, refers to a class of ownership in a corporation that provides certain privileges and advantages to the shareholders who hold it. It is a type of capital stock that sits above common stock in the company's capital structure.
Preferred stockholders have a prioritized claim over common stockholders when it comes to the distribution of assets and earnings. This means that in the event of liquidation or bankruptcy, preferred stockholders are entitled to receive their invested capital before any payments are made to common stockholders. Typically, preferred stockholders are also entitled to a fixed dividend payment, which is often higher than the dividend paid to common stockholders. These dividend payments are usually set at a fixed rate or calculated as a percentage of the par value of the preferred stock.
However, preferred stockholders generally do not have voting rights in the company or the same level of influence in decision-making as common shareholders. They are considered passive investors who prioritize a consistent dividend income over ownership control.
Preferred stock can be cumulative or non-cumulative. Cumulative preferred stock ensures that if dividend payments are suspended or reduced, the unpaid dividends accumulate and must be paid in the future. Non-cumulative preferred stock, on the other hand, does not accumulate unpaid dividends if payments are skipped or withheld.
Overall, preferred stock is an investment option that offers greater stability and priority, making it attractive for investors seeking fixed income and security, albeit with limited voting rights.
Common Misspellings for PREFERRED STOCK
- oreferred stock
- lreferred stock
- -referred stock
- 0referred stock
- peeferred stock
- pdeferred stock
- pfeferred stock
- pteferred stock
- p5eferred stock
- p4eferred stock
- prwferred stock
- prsferred stock
- prdferred stock
- prrferred stock
- pr4ferred stock
- pr3ferred stock
- prederred stock
- precerred stock
- preverred stock
Etymology of PREFERRED STOCK
The term "preferred stock" originated from the combination of the words "preferred" and "stock".
The word "preferred" is derived from the Latin word "praeferre", which means "to bear before" or "to put before". In the context of finance, the term "preferred" suggests that the stock carries certain advantages or privileges compared to common stock.
The word "stock" comes from the Old English word "stoc", meaning a "stump" or "block of wood". It was used to refer to the shares or ownership in a company that were represented by physical certificates.
When combined, "preferred stock" refers to a type of stock that holds priority over common stock in terms of dividends and other rights. The etymology suggests that preferred stock is given a higher preference or priority compared to common stock.
Similar spelling words for PREFERRED STOCK
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