Question

PB1. You are the president of Duke Company and are leading the company through the process of incorporation. The next step is determining the type of stock the company should offer. You are relying on feedback from several key executives at Duke to help you assess the wisdom in this decision. Prepare a memo to your executive team outlining the differences between common stock and preferred stock. The memo should be complete enough to assist them with assessing differences and providing you with robust feedback.

Answer 1

There are many diffrence between Common stock and Prefeferred stock.The stocks are representing the ownership of a company. But in case of preference share holders, they didnt get the right of vote in company. But the common stock holders will get the right of vote.This is the main diffrence between Common stock and preferred stock.Preferred shareholders have priority over a company's profit, meaning, they are paid dividends before common shareholders. And Common stockholders are last in line when it comes to company assets, which means they will paid out after creditors, bondholders, and preferred shareholders.The earnings that get by preference shareholders is fixed. The rate which fixed above the face value of preference share will allotted to these peoples. But in case common stockholders, the earning which available after allocating to all payments including preferred stockholders will be divideded on the basis of number of shares and give as divident. if company decided to retain some earning, These earning must be affter that. In a liquidation, preferred stockholders have a greater claim to  company's assets and earnings. The prference shares donot grow with the companies growing, But the common stockholders will grow with the company.The major advantage of preferred stock is, They will got the fixed percentage of divideent if company facing loss itself. But tthe common stock will not get this.Which means the divident of stockholders depend upon the companies profit. This are the main diffrence between Common stock and Preferred Stock. Thank You