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

We will choice the preferred stock to purchase in comparison to common stock because preferred shareholders has more claim on the company's assets and earnings and the disadvantage is that they do not have any voting rights. The preferred stockholder's are being paid the dividend on regular and also on cummulative basis.

The common stock is more riskier because the common shareholders are being paid any dividend only in case of company makes income.

The best deal would be to purchase the preferred shares because in also case the preferred shares are paid the dividend and have prior claim on the assets of the company.

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Preferred stockholders have a greater claim to a company's assets and earnings thancommon stockholders, but may not have the same voting privileges. ... When you buy a preferred stock, you will have an idea of when to expect a dividend because they are paid at regular intervals.

jeff jeffy 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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