The Pensacola journal. (Pensacola, Fla.) 1898-1985, 1920-03-03

Corpora tons have been evolved to
enable many men to cooperate in the
ffff:fIfc1t1g and operating of large in.
dustrial or commercial enterprises.
They are a logical development of
partnerships, just as partnerships We're
a development of individual ownership.
Stockholders or shareholders are the
partners, so to speak, who own and
control the corporation. Their owner
ship and control is expressed in Ger
tificates which they hold. each certifi-
cate entitled chem to a voting right in
the corpora tons affairs. and share
in its profits. If a corporation were
capitalized $1,000, 900. and that capital
ization were expressed through the is
sue of 10000 shares OF stock, each
share with par value of 500, the
owner of each share, in the case Of a
very simply organized corporation,
would be entitled to one vote out of the
ten thouSand to be cast, and a share
in the profits equal to one tent thou
sandth of the total.
As a matter of practice however. in
most of the large industrial corpora
tons existing today, ownership is not
So clearly defined nor is the division
81 profits so simple. Shares of stock
are ordinarily of two kinds, common
and preferred. and there may be. and
frequently are, two or three different
classes Of the latter. The essential diff
ference between common stock and
preferred stock ia that the dividend on
the preferred stock is paid before pro-
vision is made for the common stock
holders And by an extension of the
same idea, il is customary, in the
event that the corporation ceases TO
do business. and Tquidates its assets,
holders of preferred stock to be re-
compensed in full before any pay
ment is made to the holders of COM
mon stock. (But there are exceptions
to this rule) If million dollar cor
poration. being liquidated, should prove
to have assets worth only 100000, the
holders &C S5OO. 600 worth of preferred
stock would be repaid in fun, While
the holders Of 100000 par value COM
mon stock could secure only 100000
for division between them.
This preference carries whit, of
course, certain limitations. the chief
and most usual one being a fixed divi-
dend. Because their opportunities for
profit are greater, the owners of pre-
ferred stock must content themselves,
ordinarily with dividends OF five, six
or seven per cent. depending, of course
upon the state of the investment mar
ket at the time the shares are issued
Common shareholders on the other
hand. may receive no income at all
from their Investment in poor years.
md very high rates in prosperous
years.
The paying OF dividends on preferred
stock may be subject TO other limita-
. lions and conditions. They may be
either cumulative, or non cumulative
+ In the event of very poor year in
which the corporation did not earn
sufficient 10 pay more than its oper-
ating expenses, dividend payments on
preferred stock might necessarily be
s passed remain unpaid. If the
stock We're cumulative such passed"
dividends would be paid out Of the
earnings of the first prosperous year.
before any payment We're made on the
common stock. If on the other hand
the preferred stock We're non cumula-
tive, the passed due dividends would
not be made up and the distribution of
profits would be made TO both com
mon and preferred stockholders with