Crash Course in Accounting and Financial Statement Analysis, Second Edition

Preferred Stock

Another way to raise capital is by issuing preferred stock. While there are no set characteristics for preferred stock, preferred stock often takes priority over common stock and has special rights such as:

• Priority over regular stock relating to dividends

• Possible conversion into common stock at a preset exchange rate

• Possible retirement/redemption at the option of a company

• Priority over regular stock relating to claims of assets in case of liquidation