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Valuation and Characteristics of Stock

A hybrid security with characteristics of both common stock and bonds. It has no fixed maturity date, the nonpayment of dividends does not bring on bankruptcy, and dividends are not deductible for tax purposes. Preferred Stock
A requirement that all past, unpaid preferred stock dividends be paid before any common stock dividends are declared. Cumulative Feature (Dividends)
Generally allow for voting in the event of nonpayment of dividends, or they restrict the payment of common stock dividends if sinking-fund payments are not met or if the firm is in financial difficulty. Protective Provisions
Shares can be converted into a predetermined number of shares of common stock, if investors so choose. Convertibility
Entitles the corporation to repurchase its preferred stock from investors at stated prices over specified periods. Call Provision
Requires the firm periodically to set aside an amount of money for the retirement of its preferred stock. Money is then used to purchase preferred stock in open market. Sinking-Fund Provision
Shares that represent the ownership in a corporation. Common Stock
A means of voting in which a designated party is provided with the temporary power of attorney to vote for the signee at the corporation's annual meeting. Proxy
Limited Liability
Each share of stock allows the shareholder on vote, and each position on the board of directors is voted on separately. Majority has power to elect entire board. Majority Voting
Each share of stock allows the shareholder a number of votes equal to the number of directors being elected. Shareholder can vote for all or one candidate. Cumulative Voting
Entitles the common shareholder to maintain his or her proportionate share of ownership in the firm. Preemptive Right
A certificate issued to common stockholders giving them an option to purchase a stated number of new shares at a specified price during a 2 to 10 week period. Right
The rate of return the investor can expect to earn from the investment if it is bought at the current market price. Expected Return
Required Return
Created by: Wilkins188