(v2820.00) Preferred Stock

Total cash received for preferred shares, including:

  1. The par value (“face” or “stated” value) before shares are issued

  2. Any additional paid-in capital

For example, if a company issues 1,000 preferred shares with a par value of $20 per share and sells them at $25 per share, it would record the Preferred Stock at $25,000 ($20,000 par value plus $5,000 additional paid-in capital). Preferred Stock generally is treated as debt in Strategic Finance because, in the event of liquidation, holders of preferred stock, like holders of debt, are given priority over dividends and assets. Therefore, Preferred Stock (v2820.00) is:

  1. Subtracted with other debt accounts from Corporate Value (v5060) to compute Shareholder Value (v5070); and

  2. Included with debt accounts, in the Debt/Equity Ratio (v6040) and in calculating Unused Debt Capacity (v3560).