This preview shows page 1. Sign up to view the full content.
Unformatted text preview: Why might a company prefer the use of Preferred Stock over Common for long term financing? First and foremost, the terms for Preferred Stock are negotiated between the investor and the organization. Common Stock is normally issued to founder(s) and employees (through stock options) and Preferred Stock to investors. Preferred Stock does not offer the higher profit potential as Common Stock, indicating that the organization can better use the cash from investors. Additionally, the price of Preferred Stock is based on interest rate levels and can go down when interest rates increase. If interest rates decrease, the price of Preferred Stock increase. Additionally, Preferred Stock holders do not have voting rights....
View Full Document
This note was uploaded on 08/21/2010 for the course FIN FIN370 taught by Professor Mr.garcia during the Fall '09 term at DeVry Long Beach.
- Fall '09