preferred stock definition

preferred stock

Class of stock (shares) that pays fixed and regular interest income, instead of a dividend (whose payment and amount depends on factors beyond stockholder's control). Holders of preferred stock have claim over the firm's earnings (and assets in case of liquidation) ahead of (senior to) the claim of holders of common stock (ordinary shares) but behind (junior to) the claims of bondholders and all other creditors. Depending on the terms of the agreement under which preferred stock is issued, the degree of control of its holders over the firm's operations ranges from none to the same as that of the holders of common stock. Most preferred stock is cumulative; common stock holders cannot receive any dividend until all the unpaid interest owed to preferred stock holders is paid. For the issuing firm, preferred stock is an uneasy compromise between debt and equity, and is seen as capital with a tax advantage because interest is written off as expense against earnings. Also called preference shares.

preferred stock is in the Accounting & Auditing, Banking, Commerce & Finance, Investing and Securities & Futures Trading subjects.

preferred stock appears in the definitions of the following terms: second preferred stock, convertible arbitrage, loan capital, dividend yield, cumulative preferred stock, call risk, junior security, non-callable, composite cost of capital, poison pill and

preferred stock appears in the other terms: redeemable preferred stock, participating preferred stock, convertible preferred stock, stepped preferred stock

This content can be found on the following page:

http://www.businessdictionary.com/definition/preferred-stock.html