Essays on Preferred Stock

Over the past 25 years, IBM has been divesting from a number of its core businesses. IBM’s core businesses have over a similar period been faced with numerous challenges. As a result, sales and revenue have been declining over the years. However, the paradox of all this is that despite the declining sales and revenue, IBM’s stock value has been rising, a welcome situation for its shareholders (Henschen). The increase in share value despite a shrinking IBM illustrates a shift in the evaluation of companies over the years. Focus has shifted from a company’s value based ...

Rationale for the stock selection

Since the shares of preferred stocks have dividends that must be paid out before bonuses to the common shareholders, they are the class of ownership in a corporation. Thereby, possessing high claims on the company's assets, common stock, and earnings. It does not carry voting rights. Additionally, the preferred shares more rights as compared to the ordinary shares. Therefore, the rationale for selecting this stock rely on the ability of companies to retain the issue options of buying the common shares at an exercise price with a reasonable discount from the prices of the preferred securities. The accounting and ...

Question 1:

Wendy Borg and Jason Kushdog were two entrepreneurs who came together to form Trendsetters Inc. trendsetter Inc. was a startup aimed at providing new warehousing and distribution solutions to clothing retailers. They however had a major challenge of capital as they only had six weeks of operations before they could run out of the initial seed capital they had invested. This prompted them to seek for alternative sources of capital, venture capital being one of the most lucrative one. Neither of them had knowledge in how venture capitals work since Wendy had her background in supply chain management and ...

Introduction

The purpose of business is to obtain the maximum revenue at the lowest cost of capital in a competitive environment. The realization of this goal requires of comparing the size of the capital invested in the production and trading activities with the financial results of this activity. However, in the implementation of any kind of economic activity there is objectively a risk of loss, the volume of which is due to the specifics of a particular business. Risk is the probability of losses, damages, shortfalls of projected revenues, profits. Losses that occur in business activities can be divided into ...

MEMORANDUM

Dear Sir, This memo is written to address the problems faced by the Big Corp. as a result of the bankruptcy of its subsidiary Sub Corp. the memo discuss the different statutory and regulatory matters applicable in this matter. It also recommends the solution on whether the dividends paid by the company should be treated as a return on capital or ordinary dividends. At first, it is important to understand the basic difference between preferred and ordinary stocks. Preferred shareholders have a preferred claim to the earnings and profits of the company. When the company has excessive cash and ...

Arguments in favour of presenting redeemable preferred stock as a liability

According to SFAS 150, a mandatorily redeemable preferred stock should be reported as liabilities in the statement of financial position. This is unlike other types of preferred stock that are reported as equity in the stockholders’ equity section of the balance sheet. There are several arguments for the presentation of preferred stock as equity. Below is a discussion of why redeemable preferred stock should be presented as equity in the balance sheet. Firstly, the definition of redeemable preferred stock shows that it is more of equity than debt. It is defined as preferred stock that allows the issuer to ...