Liquidating dividend calculation lonelysouls com dating
When part of the profit is paid out to shareholders, the payment is known as a dividend.
A company that has preferred stock issued must make the dividend payment on those shares before a single penny can be paid out to the common stockholders.
Note: For the sake of simplicity, dividends have been excluded from this example and we assume only one series of preferred shares.
From this example, you can clearly see how the different preference and participation terms can determine how the proceeds from exit are allocated.
If the venture is extremely successful, all shareholders will be substantially rewarded.
Investors also want to ensure participation of all shareholders in the proceeds if a reasonably good outcome is achieved.