Common Stock vs. Preferred Stock
[Discussion week 3 ACC214_1: Common Stock vs. Preferred Stock]
The common stock and the preferred stock are the known stocks which are issued by organizations and also traded between the investors in the open market (Van, 2014). Any of this stock offers stockholders some degree of ownership regarding shares. This paper discusses the various drawbacks of owning the aforementioned types of stocks. It also explains which stock is better to issue by a company. Moreover, the paper seeks to categorically bring out the differences existing between the two types of stocks.
The section thereof discusses the benefits of owning common stock and the preferred stock in a company
Stock owners enjoy the benefits of a growing economy: When the economy grows, the company supernormal profits increase. This is true since the growth of economy results in the generation of income. A higher paycheck leads to more revenues to the company cash register.
They remedy the problems of inflation; stocks for a long time, have an average rate of 10% annual return (Van, 2014). This is better as compared to a lower inflation rate below three which do not imply an investor has an extended time horizon. One can buy or hold even when the value drops.
They are also easy to sell. The two types of stock will allow an investor to sell their stock at any given time willingly. This is important on event one needs money to cater for an urgent financial need. Since the price is volatile, the investor can undergo the possibility of taking the risk.
The possibility of loss of entire investment. This can be possible in case an entity is not operating efficiently. Here, investors will sell making the price of stock plummeting. Ultimately investor making sales may Lose their initial investment.
An investor competes against professionals who have more time and knowledge to perform investment.
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