Preferred and Common Stocks

Running head: PREFERRED STOCK AND COMMON STOCK
Preferred and Common Stocks
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Abstract
For any business entity, stock is an important issue. The stocks are forming the real ownership of such business entity. The stock holders have been categorized into two basic parts. These include the common stock holders and the preferred stock holders. The common stock holders serve as the owners of the business entity and have voting powers unlike the preferred stock which are normally similar to bond owners. This paper intends to find the differences between the common stock and the preferred stock. The paper will also identify the situations under which the corporations may opt for each stock in raising funds.
Introduction
According to Marinaccio (2011), ownership of a corporation is normally based on stocks. The stocks which form the foundation footing of any corporation can either be of common or preferred kind. The real owners of a corporative are the common stock holders. They remain legal owners of the entity and have voting rights. Their consents therefore form the basis indecision making in a corporation setting. In contrast, the preferred stock holders are similar to the bond owners. They seldom enjoy the voting rights on the corporation affairs. The preferred stock holders are normally given the first priority during the dividend payments. When claiming the assets of a corporation, the preferred stockholders are considered immediately after the bondholders.
Differences between the Common Stock and Preferred Stock
As mention...