The McGraw-Hill 36-Hour Course: Finance for Non-Financial Managers 3/E, 3rd Edition

APPENDIX ECLASSES OF COMMON STOCK AND PREFERRED STOCK

In some corporations, you may find two or more classes of common stock.^* For instance, what if you and Paul, when you sold additional stock, wanted to keep 100 percent of the management control of the corporation. You could have issued a second class of common stock, which would have the same rights to dividends as the stock you and Paul owned, but would have no voting rights. Sometimes, the certificates of such nonvoting stock will state that the stock will gain voting rights if the profits fall below a certain point, the debt rises above a certain amount, or on some other condition. These classes of stock are usually referred to by letters, such as “Class A Stock,” “Class B Stock,” and so ...