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Preferred Stock (Preferred Shares)
Definition and Meaning Explained

Preferred shares of stock represent the class of company owners who have precedence over owners of common shares in the payment of dividends and liquidation of assets. Dividends to preferred share owners, moreover, are usually cumulative: if passed over (not paid) in one period, they accumulate and must be paid at a later time before common stock dividends are paid. Ownership of preferred shares ordinarily does not confer stockholder voting rights.

The term capitalization is a measure of a company’s financial framework, covering the company’s underlying value as represented by the total securities issued, such as bonds, debentures, long-term liabilities or debt, and preferred and common stock.

A broader measure of this framework is a company’s financial structure, which includes all of the above but also short term liabilities such as Accounts payable.