Question

Explain thr 2 basic types of preferred stock

Answer 1

Answer :

Preferred stock are the stock which have preference over common stockholders to recieve dividend from the company. The two basic types of preffered stock are as follows :

a) Cummulative Preferred Stock :

Preferred stock is the stock which accumlates the unpaid dividend of the past years and and pays to preferred stock holders evn before the common equity stock holders.The unpaid dividend of the past years accumulates and are paid in the current financial year.

b) Convertible preferred stock

The preferred stock which has the option to convert into Equity shares to common stock in definate ratio at a predetrmined price in future are called as convertible preferred stock.