Question

What features or rights may alter the character of preferred stock?

Short answer

Preferred stock or shares are issued to business owners and other investors as proof of funds they have contributed to a business. They are part of a company's equity, the other two being common stock and retained earnings.

Step-by-step solution

Meaning of Preferred Stock

Preferred stock is a type of share capital that has various characteristics not found in common stock, such as traits of both an equity and a debt instrument, and is classified as a hybrid instrument.

Features or Rights that Alter the Character of Preferred Stock

Cumulative or noncumulative preferred stock,participating or nonparticipatingpreferred stock,convertible or nonconvertible preferred stock, callable or nonsalable preferred stock, and redeemable preferred stock can all change the character of preferred stock.