Thursday, 18 October 2012
Bonds Vs Preferred Stock
1. Bonds are considered as a debt, while preferred stock are considered as equity, though both the bond holder and the preferred share holder may be completely different from a common share holder, and both don't have voting rights.
2. Both bonds and preferred stock can be issued at a premium or a discount. In preferred stock, the premium is called additional paid in capital.
3. The interest has to be paid regularly for a bond (failure causes bankruptcy), while the dividends have to be paid for a preferred stock, when it is declared for the common stock.
4. Preferred stock to bonds in the claim to assets on liquidation,
5. Interest is prorated on the EPS calculation, while preferred dividend is not. Because, the dividend is paid in full, irrespective of the issue date of the preferred stock, unlike the interest for bonds outstanding.