Wk 1 DQ 1
What are some similarities and differences between common stock and preferred stock? As a shareholder, would you want preferred or common stock? Explain your answer. As a corporation, would you rather issue preferred or common stock? Explain your answer.
Preferred shareholders sometimes have the right of conversion which allows them to exchange shares of preferred stock for common stock at a specified conversion ratio. In other words, preferred stock will typically convert to common stock with the consent of a majority of the preferred stock; as such, when it converts into commons stock, all the rights of the preferred stock contained in the certificate of incorporations will disappear. Moreover, preferred stock often automatically change to common stock upon certain events, for instance events are particularly when the company makes its initial public offering or if a certain percentage of the preferred shares votes to convert.
As a stockholder I am not sure if I would rater have the preferred stock with the guaranteed payout of dividends first or the common stock with a possible higher payout. As a corporation I believe that the preferred stock would benefit them more. The reason is that without the voting rights there would be less of a chance of someone getting enough votes to take over the company.
Common stock is stock that a company issues and is the standard stock. The stockholders are able to vote on management issues within the organization and they share the same amount of profit or loss. Common sto...