Fill in the blanks. A corporation issues two classes of equity shares, preferred shares and common...

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Fill in the blanks. A corporation issues two classes of equity shares, preferred shares and common...

Fill in the blanks. A corporation issues two classes of equity shares, preferred shares and common shares. The preferred shares have priority on dividends and distribution on liquidation over the common shares. Therefore, these two classes of shares are not ________.

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Answer 1

Answer #1

A corporation issues two classes of equity shares, preferred shares and common shares. The preferred shares have priority on dividends and distribution on liquidation over the common shares. Therefore, these two classes of shares are not SIMILIAR

Following are the key points relating to Preffered shares

In the event of a liquidation, preferred shareholder's claim on assets is greater than common shareholder but less than bondholders.
Preferred shareholders have a higher claim on distribution of dividend than common shareholder.
Preferred shareholder usually have no or limited, voting rights.
Preferred stock has characteristics of both bonds and common stock which enhances its appeal to investors.

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Answer 2

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