PREFERRED AND COMMON STOCK

Preferred and Common Stock

Preferred and Common Stock

Introduction

Stockholders usually possess a great amount of claim to whatever a company earns and holds as its assets. This especially pertains during prosperous times as during these times a company has surplus cash and takes the decisions to distribute its money as dividends to the company's investors. When the company distributes its assets and earnings, those stockholders who are preferred by the company must be paid prior to the common stockholders (Mellicher & Norton, 2007).

This implies that when the company must liquidate its assets and make payments to all its creditors and ...