DISTINGUISH

BETWEEN ORDINARY
OR COMMON STOCK
AND PREFERRED
STOCK
ORDINARY OR COMMON
STOCK
IS A FORM OF LONG-TERM
EQUITY THAT REPRESENTS
BASIC OWNERSHIP INTEREST
OF THE FIRM.
PREFERRED STOCK
IS A CLASS OF EQUITY SHARES WHICH
HAS PREFERENCE OVER ORDINARY
EQUITY SHARES IN THE PAYMENT OF
DIVIDENDS AND IN THE DISTRIBUTION
OF CORPORATION ASSETS IN THE
EVENT OF LIQUIDATION
COMPARATIVE FEATURES OF
ORDINARY SHARES,
PREFERRED SHARES, AND
BONDS
 ORDINARY EQUITY SHARES PREFERRED SHARES BONDS

BELONGS TO ORDINARY EQUITY

OWNERSHIP AND CONTROL OF THE SHAREHOLDERS THROUGH VOTING LIMITED RIGHTS WHEN DIVIDENDS LIMITED RIGHTS UNDER DEFAULT
FIRM RIGHT AND RESIDUAL CLAIM TO ARE MISSED IN INTEREST PAYMENTS
INCOME

MUST RECEIVE PAYMENT BEFORE

OBLIGATION TO PROVIDE RETURN NONE CONTRACTUAL OBLIGATION
ORDINARY SHAREHOLDER

LOWEST CLAIM OF ANY SECURITY BONDHOLDERS AND CREDITORS

CLAIM TO ASSETS IN BANKCRUPTCY HIGHEST CLAIM
HOLDER MUST BE SATISFIED FIRST

COST OF DISTRIBUTION HIGHEST MODERATE LOWEST

MODERATE RISK, MODERATE

RISK-RETURN TRADE OFF HIGHEST RISK, HIGHEST RETURN LOWEST RISK, MODERATE RETURN
RETURN

TAX DEDUCTIBLE
TAX STATUS OF PAYMENT BY
NOT DEDUCTIBLE NOT DEDUCTIBLE COST = INTEREST PAYMENT x (1 –
CORPORATION
TAX RATE

A PORTION OF DIVIDEND PAID TO

TAX STATUS OF PAYMENT TO GOVERNMENT BOND INTEREST IS
ANOTHER CORPORATION IS TAX SAME AS ORDINARY SHARES
RECIPIENT TAX EXEMPT
EXEMPT
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