会计学原理Financial Accounting by Robert Libby第八版 第十一(7)

Chapter 11 - Reporting and Interpreting Owners’ Equity

M11–4.

Common stock is the basic voting stock issued by a corporation. It ranks after preferred stock for dividends and assets distributed upon liquidation of the

corporation. The dividend rate for common stock is determined by the board of directors, and is based on the company’s profitability. The dividend rate for

preferred stock is fixed by a contract. Common stock has more potential for growth than preferred stock if the company is profitable. On the other hand, the investor may lose more money with common stock than with preferred stock if the company is not profitable.

Usually, It is advisable to invest in the common stock if you believe the company will be profitable. Common stock will receive a higher return on the $100,000 than preferred stock would.

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