Question

what is the preferred capital balance to be used in an interest allocation, why?

Answer 1

Preferred Capital means the amounts contributed from time to time by any one or more of the Partners of a Partner Group to the capital of the Partnership to the extent that the amounts so contributed by the Partners of such Partner Group in the aggregate exceed the sum of the Base Capital, the Unrecovered Priority Capital Contributions and the Base Loan Advances.

                     The term "stock" refers to ownership or equity in a firm. There are two types of equity - common stock and preferred stock. Preferred stockholders have a higher claim to dividends or asset distribution than common stockholders. Preferred shareholders have priority over common stockholders when it comes to dividends, which generally yield more than common stock and can be paid monthly or quarterly.

1. Preferred stockholders have a higher claim on distributions (e.g. dividends) than common stockholders.

2. Preferred stockholders usually have no or limited, voting rights in corporate governance.

3. In the event of a liquidation, preferred stockholders claim on assets is greater than common stockholders but less than bondholders.

4. Preferred stock has characteristics of both bonds and common stock which enhances its appeal to certain investors.

Preferred shares sometimes have par values that are more than marginal, but most common shares today have par values of just a few pennies. Because of this, "additional paid-in capital" tends to be representative of the total paid-in capital figure and is sometimes shown by itself on the balance sheet.

A corporation may issue two basic classes or types of capital stock—common and preferred. If a corporation issues only one class of stock, this stock is common stock. All of the stockholders enjoy equal rights. Common stock is usually the residual equity in the corporation, meaning that all other claims against the corporation rank ahead of the claims of the common stockholder. Preferred stock is a class of capital stock that carries certain features or rights not carried by common stock. Within the basic class of preferred stock, a company may have several specific classes of preferred stock, each with different dividend rates or other features.

1. Using bonds with fixed interest charges that must be paid regardless of the amount of net income.

2. Issuing so many additional shares of common stock that earnings per share are less in the current year than in prior years.

3. Diluting the common stockholders’ control of the corporation, since preferred stockholders usually have no voting rights.

Preferred stock (also called preferred shares, preference shares or simply preferred) is an equity security with properties of both equity and a debt instrument, and is generally considered a hybrid instrument. Preferred are senior (higher ranking) to common stock, but subordinate to bonds in terms of claim (or rights to stock holders’ share of company assets). Preferred stock usually carries no voting rights, but may carry a dividend and may have priority over common stock upon liquidation, and in the payment of dividends. Terms of the preferred stock are stated in a “Certificate of Designation.

                  Preferred stock is a class of capital stock that carries certain features or rights not carried by common stock. Within the basic class of preferred stock, a company may have several specific classes of preferred stock, each with different dividend rates or other features.

When a corporation issues both preferred and common stock, the preferred stock may be:

1. Preferred as to dividends. It may be noncumulative or cumulative.

2. Preferred as to assets in the event of liquidation.

3. Convertible or nonconvertible.

4. Callable.

All preferred stock is reported on the balance sheet in the stockholders’ equity section and it appears first before any other stock. The par value, authorized shares, issued shares, and outstanding shares is disclosed for each type of stock.