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They calculate the cost of preferred stock by dividing the annual preferred dividend by the market price per share. Once they have determined that rate, they can compare it to other financing options.
Preferred stock can include rights such as preemption, convertibility, callability, and dividend and liquidation preference.
Preferred shareholders do not have voting rights, but they do receive preferential treatment when it comes to a company's distributions. Dividends are paid out prior to common shares and If the company goes under, preferred shareholders have a higher claim on company assets than common shareholders.
Preferred stock is listed first in the shareholders' equity section of the balance sheet, because its owners receive dividends before the owners of common stock, and have preference during liquidation.
Preferred typically have no voting rights, whereas common stockholders do. Preferred stockholders may have the option to convert shares to common shares but not vice versa. Preferred shares may be callable where the company can demand to repurchase them at par value.