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PARTICIPATING PREFERRED

PARTICIPATING PREFERRED. Fully Participating Shares equally with the common stock in any extra dividends Distributed proportionally, based on total par values of common and preferred Partially Participating Participation is limited. PROPERTY DIVIDENDS.

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PARTICIPATING PREFERRED

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  1. PARTICIPATING PREFERRED • Fully Participating • Shares equally with the common stock in any extra dividends • Distributed proportionally, based on total par values of common and preferred • Partially Participating • Participation is limited

  2. PROPERTY DIVIDENDS • A nonreciprocal transfer of nonmonetary assets between a corporation and its owners. • Assets other than cash • Usually securities of other companies • Record at fair value of the asset transferred • Gain or loss is recognized

  3. LIQUIDATING DIVIDENDS • A return of contributed capital • Not based on earnings; decreases paid-in capital

  4. STOCK DIVIDENDS • A pro-rata nonreciprocal distribution of additional shares of a corporation's stock to its stockholders.

  5. STOCK DIVIDENDS • Why? • Capitalize retained earnings, thus signaling to the stockholders that a portion of retained earnings is no longer available for future dividends. • Pacify stockholders without using cash. • Reduce market price of stock (large stock dividend).

  6. EFFECT OF STOCK DIVIDENDS • Increase number of shares outstanding • No change in total Stockholders' Equity, but Retained Earnings decreases and Contributed Capital increases • No change in par or stated value • No change in ownership interest of stockholders • Market price of stock may decrease • No change in cash

  7. SMALL STOCK DIVIDEND • Less than 20% or 25% of outstanding shares • Fair market value of the stock issued is transferred from Retained Earnings to Contributed Capital accounts.

  8. LARGE STOCK DIVIDEND • Greater than 25% of outstanding shares • "Split-up effected in the form of a dividend" • Par or stated value of the stock issued is transferred from Retained Earnings to Contributed Capital

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