Identify whether the key characteristic describes common stock (CS) or preferred

Question

Identify whether the key characteristic describes common stock (CS) or preferred stock (PS).

1. Source of financing which places minimum constraints on the firm

2. Used by young firms receiving investment funds from venture capital firms

3. Potential dilution of earnings and voting power

4. Fixed financial obligation

5. Increases the firm's borrowing power

6. May have cumulative and participating features

7. May be convertible into another type of security

8. Last to receive earnings or distribution of assets in the event of bankruptcy

9. Frequently includes a call feature

Explanation / Answer

1. CS prefered stock has foxed obligation

2. PS

3. PS

4. PS

5. CS

6. PS

7. PS

8. CS

9. PS

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