Companies frequently issue both preferred stock and common stock. What are the major differences in the rights of stockholders between these two classes of stock

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Answer:

Preference Shares

  • They get a stated amount of dividend every period dependent on the income of the company
  • This dividend is paid to them before dividends are paid to Common shareholders
  • They cannot vote in the company for either directors or general matters
  • They get preference over common shareholders in cases of liquidation

Common Shares

  • Common shares are equity interests in the company which means that they can vote on general and major issues matters as well as to elect directors.
  • They get dividends based on company performance and after the preference shareholders
  • They can transfer ownership of their stock to other individuals.

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