Essay on Stock: Stock and Preferred Stock

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I see that you guys are interested in buying stock as a way to invest your extra money that you have leftover from your new business’.

I also see that you guys have been looking at five main companies to invest in. Target, Barnes and Noble, Mcdonalds, Boeing, Johnson and Johnson, am I correct?

Perhaps, I can help you clear up some of the questions that you may want to ask. When we are looking at the Balance Sheet of these five companies, we see that we start out looking at misc. stock options warrants. Options are basically a contract between two people that gives the holder the right, not the obligation, to buy or sell stock at a specific price and specific date. Warrants act as an agreement between the stockholder or investor and the issuing company which guarantees that holders right to purchase stock at a fixed price, regardless of market values, until the warrant expires.

This can be a good deal if you purchase preferred stock the warrant sometimes has to be sold before you can start collecting dividends. Dividends are the portions of the companies earnings paid to the investor or stockholder.

Next we look at redeemable preferred stock and preferred stock because you are probably wondering what the difference is. Preferred stock is sold at a higher price than common stock, but as a holder you receive dividends earlier from preferred stock, which could be beneficial if the company you invested in, goes bankrupt and can only pay out certain amount of dividends. In exchange for this benefit, owners of Preferred stock do not have voting rights within the company like Common Stockholders. Redeemable Preferred stock is very similar to preferred stock but can be recalled at any time by the issuing company for a certain price to be retired.

As a holder of Common stock, you have the right to elect the board of directors and get to vote on corporate policy. But you are not very high on the priority list of getting paid if the company goes bankrupt.

As we look down the list Retain Earnings is next. Retained Earnings is simply the amount of net earnings not paid as dividends to stockholders but kept by the company to be reinvested in the company or used to pay debts.

As you can see the only company that you guys are looking at that doesn’t have treasury stock is Target. Treasury stock is issued stock
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