If you had the choice to purchase common stock or preferred stock from your company, which...

If you had the choice to purchase common stock or preferred stock from your company, which would you choose? Why? Which is riskier? Which is the better deal?

Expert Solution

I would choose a common stock.

The difference between the common stock and preferred stock are that the common stockholder has the right to vote and he is part of the decision-making process of the firm. Whereas a preferred stockholder has no such intervention in the decision making but they have the first claim on the assets of the firm in case of solvency making the preferred shares less risky.

I would choose common stock because in that way I Will be more involved in decision making and influence the company where I have invested. I will be knowing which steps taken by the firm will be beneficial and what will be the fallback. If I choose preferred shares I will be only fence sitting and others will be taking the important decision regarding my investment. Though a little riskier the common stocks are a better deal. It makes me responsible for the decisions I have taken which may lead to profit or loss but I will be the responsible for it.

Rahul Sunny answered 2 years ago

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If you had the choice to purchase common stock or preferred stock from your company, which...

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