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4. Claim to Income Voting Right Purchasing New Shares Preferred Stock Rules and Rights Provisions of Preferred Stock Comparing Common Stock, Preferred Stock, and Debt Rules and Rights of Common and Preferred Stock Stock Valuation > Rules and Rights of Common and Preferred Stock Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance?campaign_content=book_192_section_72&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=dir ect&utm_source=boundless

5. Common stock and preferred stock are both forms of equity ownership but carry different rights and claims to income. Preferred stock shareholders will have claim to assets over common stock shareholders in the case of company liquidation. Preferred stock also has first right to dividends. Claim to Income Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/stock-valuation-7/rules-and-rights-of-common-and-preferred-stock-72/claim-to- income-323- 3879?campaign_content=book_192_section_72&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundl ess 1903 stock certificate of the Baltimore and Ohio Railroad View on Boundless.com Stock Valuation > Rules and Rights of Common and Preferred Stock

6. Common stock shareholders can generally vote on issues, such as members of the board of directors, stock splits, and the establishment of corporate objectives and policy. While having superior rights to dividends and assets over common stock, generally preferred stock does not carry voting rights. Many of the voting rights of a shareholder can be exercised at annual general body meetings of companies. An annual general meeting is a meeting that official bodies, and associations involving the general public, are often required by law to hold. Voting Right Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/stock-valuation-7/rules-and-rights-of-common-and-preferred-stock-72/voting- right-324- 7971?campaign_content=book_192_section_72&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundl ess Shareholder Meeting View on Boundless.com Stock Valuation > Rules and Rights of Common and Preferred Stock

7. New share purchase is an important indicator of current shareholder belief in the health of the company and long term prospects for growth. Current Shareholders will often have preemptive rights that give them the right to purchase newly issued company shares before they go on sale to the general public. New shares can be purchased on exchanges, which offer a platform for the financial marketplace. Purchasing New Shares Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/stock-valuation-7/rules-and-rights-of-common-and-preferred-stock- 72/purchasing-new-shares-325- 1035?campaign_content=book_192_section_72&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundl ess Exchanges View on Boundless.com Stock Valuation > Rules and Rights of Common and Preferred Stock

8. Preferred stock generally does not carry voting rights, but this may vary from company to company. Preferred stock can gain cumulative dividends, convertibility to common stock, and callability. The rights that come with ownership of preferred stock are detailed in a "Certificate of Designation". Preferred Stock Rules and Rights Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/stock-valuation-7/rules-and-rights-of-common-and-preferred-stock- 72/preferred-stock-rules-and-rights-326- 7558?campaign_content=book_192_section_72&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundl ess VOC stock View on Boundless.com Stock Valuation > Rules and Rights of Common and Preferred Stock

9. If a preferred share has cumulative dividends, then it contains the provision that should a company fail to pay out dividends at any time at the stated rate, then the issuer will have to make up for it as time goes on. Convertible preferred stock can be exchanged for a predetermined number of company common stock shares. Often times companies will keep the right to call or buy back preferred shares at a predetermined price. Participating preferred issues offer holders the opportunity to receive extra dividends if the company achieves predetermined financial goals. Sometimes, dividends on preferred shares may be negotiated as floating; they may change according to a benchmark interest-rate index. Provisions of Preferred Stock Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/stock-valuation-7/rules-and-rights-of-common-and-preferred-stock- 72/provisions-of-preferred-stock-327- 5155?campaign_content=book_192_section_72&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundl ess Historical dividend information for Franklin Automobile Company View on Boundless.com Stock Valuation > Rules and Rights of Common and Preferred Stock

10. Common stock and preferred stock fall behind debt holders as creditors that would receive assets in the case of company liquidation. Common stock and preferred stock are both types of equity ownership. They receive rights of ownership in the company, such as voting and dividends. Debt holders often receive a bond for lending and while this does not give the ownership rights of being a stockholder, it does create a superior claim to a company's assets in the case of liquidation. Comparing Common Stock, Preferred Stock, and Debt Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/stock-valuation-7/rules-and-rights-of-common-and-preferred-stock- 72/comparing-common-stock-preferred-stock-and-debt-328- 3880?campaign_content=book_192_section_72&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundl ess A bond from the Dutch East India Company View on Boundless.com Stock Valuation > Rules and Rights of Common and Preferred Stock

11. Free to share, print, make copies and changes. Get yours at www.boundless.com Appendix

12. Key terms bond A bond is an instrument of indebtness of the bond issuers toward the bond holders. Callable shares Shares which can be bought back by the issuer at a predetermined price. Common stock Common stock is a form of equity and type of security. Common stock shareholders are at the bottom of the line when it comes to dividends and receiving compensation in the case of bankruptcy. Common stock Common stock is a form of corporate equity ownership, a type of security. Common stock Common stock is a form of equity and type of security. Common stock shareholders are at the bottom of the line when it comes to dividends and receiving compensation in the case of bankruptcy. Convertible preferred stock Convertible preferred stock can be exchanged for a predetermined number of company common stock shares. Cumulative Dividends Condition where owners of certain shares will receive accumulated dividends in the case a company cannot pay out dividends at the stated rate at the stated time. liquidation liquidation is the process by which a company (or part of a company) is brought to an end, and the assets and property of the company redistributed Preemption The right of a shareholder to purchase newly issued shares of a business entity before they are available to the general public so as to protect individual ownership from dilution. Preferred Stock Preferred stock is an equity security that has the properties of both an equity and debt instrument and is higher ranking than common stock. Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation

13. Preferred Stock Preferred stock is an equity security that has the properties of both an equity and debt instrument and is higher ranking than common stock. Stock Exchange A form of exchange that provides services for stock brokers and traders to trade stocks, bonds and other securities. Voting rights Rights which are generally associated with common stock shareholders in regards to business entity matters ( such as electing the board of directors or establishing corporate policy) Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation

14. Shareholder Meeting This scene from "The Office" humorously illustrates a shareholder meeting, where the shareholder can exercise their right to vote on company issues or question company directors. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikipedia. "Shareholder Meeting." GNU FDL http://en.wikipedia.org/wiki/Shareholder_Meeting View on Boundless.comGNU FDLhttp://en.wikipedia.org/wiki/Shareholder_MeetingView on Boundless.com Stock Valuation

15. A bond from the Dutch East India Company A bond is a financial security that represents a promise by a company or government to repay a certain amount, with interest, to the bondholder. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikipedia. "Vereinigte Ostindische Compagnie bond." CC BY-SA http://en.wikipedia.org/wiki/File:Vereinigte_Ostindische_Compagnie_bond.jpg View on Boundless.comCC BY-SAhttp://en.wikipedia.org/wiki/File:Vereinigte_Ostindische_Compagnie_bond.jpgView on Boundless.com Stock Valuation

16. Exchanges New shares can be traded on exchanges such as the Nasdaq, but will usually be offered to current shareholders before being put on sale to the general public. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikipedia. "Nasdaq." GNU FDL http://en.wikipedia.org/wiki/Nasdaq View on Boundless.comGNU FDLhttp://en.wikipedia.org/wiki/NasdaqView on Boundless.com Stock Valuation

17. 1903 stock certificate of the Baltimore and Ohio Railroad Preferred and common stock both carry rights of ownership, but represent different classes of equity ownership. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikipedia. "B&O RR common stock." Public domain http://en.wikipedia.org/wiki/File:B%2526O_RR_common_stock.jpg View on Boundless.comPublic domainhttp://en.wikipedia.org/wiki/File:B%2526O_RR_common_stock.jpgView on Boundless.com Stock Valuation

18. VOC stock Preferred stock is a security ( a little more modern that this stock from the VOC or Dutch East India Company) that carries certain rights which designate it from common stock or debt. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikipedia. "Stock." GNU FDL http://en.wikipedia.org/wiki/Stock View on Boundless.comGNU FDLhttp://en.wikipedia.org/wiki/StockView on Boundless.com Stock Valuation

19. Historical dividend information for Franklin Automobile Company Dividends are one of the privileges of stock ownership, and preferred shares get more rights to them than common shares do. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikimedia. "Wikimedia." CC BY-SA http://wikimedia.org View on Boundless.comCC BY-SAhttp://wikimedia.orgView on Boundless.com Stock Valuation

20. Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation Which of the following statements about a preferred stockholder's rights to the company's income is NOT true? A) When a business is liquidated, preferred shareholders receive funds equal to the stock's par value. B) A preferred stock's par value represents the original investment when the shares were issued. C) Dividends to common and preferred shareholders are paid at the same time. D) The price of both common and preferred shares are subject to market determinants.

21. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Stock Valuation Which of the following statements about a preferred stockholder's rights to the company's income is NOT true? A) When a business is liquidated, preferred shareholders receive funds equal to the stock's par value. B) A preferred stock's par value represents the original investment when the shares were issued. C) Dividends to common and preferred shareholders are paid at the same time. D) The price of both common and preferred shares are subject to market determinants.

22. Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation Which of the following statements regarding voting rights is NOT true? A) Generally each share of common stock equals one vote. B) Corporate shareholders are prohibited from casting their vote online. C) Preferred stock generally does not carry voting rights. D) Shareholders generally get to vote on who is part of the corporate Board of Directors.

23. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Stock Valuation Which of the following statements regarding voting rights is NOT true? A) Generally each share of common stock equals one vote. B) Corporate shareholders are prohibited from casting their vote online. C) Preferred stock generally does not carry voting rights. D) Shareholders generally get to vote on who is part of the corporate Board of Directors.

24. Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation Which of the following is a reason a shareholder may buy more shares in a company? A) To prevent the shareholder's percentage of ownership in the company from being diluted. B) The shareholder believes the company is a good investment. C) The shareholder wishes to maintain his ownership position in the company. D) All of these answers.

25. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Stock Valuation Which of the following is a reason a shareholder may buy more shares in a company? A) To prevent the shareholder's percentage of ownership in the company from being diluted. B) The shareholder believes the company is a good investment. C) The shareholder wishes to maintain his ownership position in the company. D) All of these answers.

26. Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation Which of the following is generally NOT a right granted to owners of preferred shares? A) Callability. B) Convertibility to common shares. C) Preference with regards to receiving dividends. D) Variable dividend amounts.

27. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Stock Valuation Which of the following is generally NOT a right granted to owners of preferred shares? A) Callability. B) Convertibility to common shares. C) Preference with regards to receiving dividends. D) Variable dividend amounts.

28. Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation A company sells preferred stock with the provision that the company can repurchase the shares from the shareholder at a predetermined price. Which of the following describes this stock? A) Callable preferred stock. B) Participating preferred stock. C) Convertible preferred stock. D) All of these answers.

29. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Stock Valuation A company sells preferred stock with the provision that the company can repurchase the shares from the shareholder at a predetermined price. Which of the following describes this stock? A) Callable preferred stock. B) Participating preferred stock. C) Convertible preferred stock. D) All of these answers.

30. Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation A company goes bankrupt and its assets are to be divided between its shareholders and debtholders. Which of the following, from highest priority to lowest, is the correct order of how the company's assets should be divided? A) Bondholders, preferred shareholders, common shareholders. B) Bondholders, common shareholders, preferred shareholders. C) Preferred shareholders, bondholders, common shareholders. D) Preferred shareholders, common shareholders, bondholders.

31. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Stock Valuation A company goes bankrupt and its assets are to be divided between its shareholders and debtholders. Which of the following, from highest priority to lowest, is the correct order of how the company's assets should be divided? A) Bondholders, preferred shareholders, common shareholders. B) Bondholders, common shareholders, preferred shareholders. C) Preferred shareholders, bondholders, common shareholders. D) Preferred shareholders, common shareholders, bondholders.

32. Attribution Wikipedia. "Stock exchange." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Stock_exchangeCC BY-SA 3.0http://en.wikipedia.org/wiki/Stock_exchange Wikipedia. "Pre-emption right." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Pre-emption_rightCC BY-SA 3.0http://en.wikipedia.org/wiki/Pre-emption_right Wikipedia. "Stock Exchange." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Stock%20ExchangeCC BY-SA 3.0http://en.wikipedia.org/wiki/Stock%20Exchange Wikipedia. "Preemption." CC BY-SA 3.0 http://en.wikipedia.org/wiki/PreemptionCC BY-SA 3.0http://en.wikipedia.org/wiki/Preemption Wikipedia. "Common stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Common_stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Common_stock Wikipedia. "Preferred stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Preferred_stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Preferred_stock Wikipedia. "Common stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Common%20stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Common%20stock Wikipedia. "Preferred Stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Preferred%20StockCC BY-SA 3.0http://en.wikipedia.org/wiki/Preferred%20Stock Wikipedia. "Bond (finance)." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Bond_%2528finance%2529CC BY-SA 3.0http://en.wikipedia.org/wiki/Bond_%2528finance%2529 Wikipedia. "Stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/StockCC BY-SA 3.0http://en.wikipedia.org/wiki/Stock Wikipedia. "Preferred stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Preferred_stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Preferred_stock Wikipedia. "Common stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Common_stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Common_stock Wikipedia. "Preferred Stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Preferred%20StockCC BY-SA 3.0http://en.wikipedia.org/wiki/Preferred%20Stock Wikipedia. "Common stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Common%20stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Common%20stock Wiktionary. "bond." CC BY-SA 3.0 http://en.wiktionary.org/wiki/bondCC BY-SA 3.0http://en.wiktionary.org/wiki/bond Wikipedia. "Preferred stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Preferred_stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Preferred_stock Wikipedia. "Preferred stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Preferred_stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Preferred_stock Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation

33. Wikipedia. "Preferred stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Preferred_stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Preferred_stock Wikipedia. "Preferred stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Preferred_stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Preferred_stock Wikipedia. "Callable shares." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Callable%20sharesCC BY-SA 3.0http://en.wikipedia.org/wiki/Callable%20shares Wikipedia. "Convertible preferred stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Convertible%20preferred%20stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Convertible%20preferred%20stock Wikipedia. "Cumulative Dividends." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Cumulative%20DividendsCC BY-SA 3.0http://en.wikipedia.org/wiki/Cumulative%20Dividends Wikipedia. "Preferred stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Preferred_stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Preferred_stock Wikipedia. "Preferred Stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Preferred%20StockCC BY-SA 3.0http://en.wikipedia.org/wiki/Preferred%20Stock Wiktionary. "liquidation." CC BY-SA 3.0 http://en.wiktionary.org/wiki/liquidationCC BY-SA 3.0http://en.wiktionary.org/wiki/liquidation Wikipedia. "Stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/StockCC BY-SA 3.0http://en.wikipedia.org/wiki/Stock Wikipedia. "Common stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Common_stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Common_stock Wikipedia. "Preferred stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Preferred_stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Preferred_stock Wikipedia. "Annual general meeting." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Annual_general_meetingCC BY-SA 3.0http://en.wikipedia.org/wiki/Annual_general_meeting Wikipedia. "Voting rights." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Voting%20rightsCC BY-SA 3.0http://en.wikipedia.org/wiki/Voting%20rights Wikipedia. "Preferred Stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Preferred%20StockCC BY-SA 3.0http://en.wikipedia.org/wiki/Preferred%20Stock Wikipedia. "Common stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Common%20stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Common%20stock Free to share, print, make copies and changes. Get yours at www.boundless.com Stock Valuation