Question

List three distinguishing characteristics of corporate common stock (versus preferred stock or bonds): (3 pts.)

1.)

2.)

3.)

Answer 1

Following are the distinguishing characterestics of a corporate common stock (versus preferred stock or Bonds) : -

1. Gist

Common Stock are the main source for raising funds and they signify ownership in a company, whereas the preferred stock is the shares which gurantees shareholders fix rate and they are lender of the capital and not owners

2. Dividend

Common stock holders recieve dividends at fluctuating rate after meeting all the liability payments whereas Preferred stock holders  recieve dividends at fixed rate and before the common stock holders.

3. Convertibility

Common stock can not be converted whereas some preferred  stock can be converted into a common stock

4. Amount Overdue

There is no provision to accumulate dividend of previous year due to this common stock holders will not get previous year overdue payment of dividend whereas preferred stockholders get payment of previous year's pending dividend (Depending upon type of preferred stock they hold).