Maikling kwento - filipino DFDFDFDFDaskajdguahdaChapter 1 introduced the transaction processing system (TPS) as an activity consisting of three major subsystems called cycles: the revenue cycle, the e PDF

Preview

Summary

Chapter 1 introduced the transaction processing
system (TPS) as an activity consisting of three
major subsystems called cycles: the revenue
cycle, the expenditure cycle, and the conversion cycle. Even
though each cycle performs different specific tasks and
supports diff...

Description

Preferred Stock One main difference from common stock is that preferred stock comes with no voting rights. So when it comes time for a company to elect a board of directors or vote on any form of corporate policy, preferred shareholders have no voice in the future of the company. In fact, preferred stock functions similarly to bonds since with preferred shares, investors are usually guaranteed a fixed dividend in perpetuity. The dividend yield of a preferred stock is calculated as the dollar amount of a dividend divided by the price of the stock. This is often based on the par value before a preferred stock is offered. It's commonly calculated as a percentage of the current market price after it begins trading. This is different from common stock, which has variable dividends that are declared by the board of directors and never guaranteed. In fact, many companies do not pay out dividends to common stock at all. Like bonds, preferred shares also have a par value which is affected by interest rates. When interest rates rise, the value of the preferred stock declines, and vice versa. With common stocks, however, the value of shares is regulated by demand and supply of the market participants. In a liquidation, preferred stockholders have a greater claim to a company's assets and earnings. This is true during the company's good times when the company has excess cash and decides to distribute money to investors through dividends. The dividends for this type of stock are usually higher than those issued for common stock. Preferred stock also gets priority over common stock, so if a company misses a dividend payment, it must first pay any arrears to preferred shareholders before paying out common shareholders. Unlike common shares, preferreds also have a callability feature which gives the issuer the right to redeem the shares from the market after a predetermined time. Investors who buy preferred shares have a real opportunity for these shares to be called back at a redemption rate representing a significant premium over their purchase price. The market for preferred shares often anticipates callbacks and prices may be bid up accordingly. Volume 75%

Why Is Preferred Stock Important? Preferred stock gives you a financing alternative to taking on debt. You generally maintain greater control over your company than if you issue new common shares. You can also remain flexible for future financing rounds by keeping debt off of your balance sheet and retaining a call option. The call option allows you to reduce your outstanding equity and offer a greater portion of your company.

Preferred Stock Features Preferred stock may carry optional features that benefit either the company or shareholders. These are set out in the initial preferred stock agreement.

 







 



Callable: A call option gives you the right to repurchase preferred shares at a fixed price or par value after a set date. You have sole discretion whether to exercise the option. Cumulative: You may retain the right to suspend payment of dividends. If preferred stock is designated as cumulative, the suspended dividends accumulate, and you must later pay them in full. Participating: A participating feature gives preferred shareholders the right to receive a share of dividends paid to common shareholders. This is in addition to preferred dividends. Convertible: Convertible preferred shares may be exchanged for common shares. This may happen at the option of the company, the shareholder or based on certain financial conditions. Voting: Most preferred shareholders have no voting rights under normal circumstances. Special voting rights may apply when dividends are suspended or the company is in financial distress. This provides additional protection to preferred shareholders. Adjustable Rate: The dividend rate may vary based on external factors. This provides protection against changes in inflation or interest rates. Preference: If the company has multiple issues of preferred stock, the preferred stock may be ranked by priority with the highest being prior, followed by first preference, second preference, etc. Trust Preferred Stock: A form of preferred stock that can act as debt from a tax perspective, but is seen as common stock on the balance sheet...