Differences in Preferred and Common Shares
Preferred shares are for employees. They get paid first if the company buys back the stock but don't get to vote on the board of trustees. Common shares are for outsiders; they get paid after employees but get to vote on the board of trustees on matters that affect the company's direction. (Lesson 4-3 Page 2)
In summary, the main differences between preferred shares and common shares are:
1. Payment priority: Preferred shares have priority over common shares when it comes to receiving dividends or in the event of liquidation.
2. Voting rights: Preferred shareholders usually do not have voting rights, while common shareholders have the right to vote on important company decisions.
3. Ownership rights: Common shareholders are typically considered owners of the company, while preferred shareholders are more like creditors.
4. Dividend payments: Preferred shareholders receive fixed dividend payments, while common shareholders receive dividends based on the company's performance.
Overall, preferred shares are more conservative investments with lower risk and potentially lower returns, while common shares offer higher growth potential but also higher risk.