Stock and their

valuations
MAULANA RIZKY FAADILLAH – 195020207111058
Preferred Stock and Its Features
Preferred stock is a hybrid form of financing, combining features of debt and common stock. In the event of liquidation, a preferred
stockholder’s claim on assets comes after that of creditors but before that of common stockholders. Usually, this claim is restricted to the par
value of the stock.

 Cumulative Dividends Feature

A requirement that all cumulative unpaid dividends on the preferred stock be paid before a dividend may be paid on the common stock.
 Participating Feature
Preferred stock where the holder is allowed to participate in increasing dividends if the common stockholders receive increasing dividends.
 Voting Rights (in Special Situations)
Because of their “preferred” (prior) claim on assets and income, preferred stockholders are not normally given a voice in management unless
the company is unable to pay preferred stock dividends during a specified period.
 Retirement of Preferred Stock
The fact that preferred stock, like common stock, has no maturity does not, however, mean that most preferred stock issues will remain
outstanding forever. Provision for retirement of the preferred stock invariably is made.
 Use in Financing
Nonconvertible preferred stock is not used extensively as a means of long-term financing. One of its drawbacks is the fact that the preferred
dividend is not tax deductible by the issuer.
Common Stock and Its Features
Securities that represent the ultimate ownership (and risk) position in a corporation.

 Authorized, Issued, and Outstanding Shares

The corporate charter of a company specifies the number of authorized shares of common stock, the
maximum that the company can issue without amending its charter.
 Par Value
The face value of a stock or bond.
 Book Value and Liquidating Value
The book value per share of common stock is the shareholders’ equity – total assets minus liabilities
and preferred stock as listed on the balance sheet – divided by the number of shares outstanding.
 Market Value
Market value per share is the current price at which the stock is traded. For actively traded stocks,
market price quotations are readily available.
Rights of Common Shareholders

 Right to Income
Common shareholders are entitled to share in the earnings of the company only if cash
dividends are paid. Shareholders also prosper from the market value appreciation of their
shares, but they are entirely dependent on the board of directors for the declaration of
dividends that give them income from the company.
 Voting Rights
Because the common shareholders of a company are its owners, they are entitled to elect
a board of directors.
 Right to Purchase New Shares (Maybe)
a firm’s corporate charter or state statute may require that a new issue of common stock
or an issue of securities convertible into common stock be offered first to existing
common shareholders because of their preemptive right.
Dual-Class Common Stock

Two classes of common stock, usually designated Class A and Class B. Class A is usually
the weaker voting or nonvoting class, and Class B is usually the stronger.
Thank You