Expressing Preferred Stock on the Balance Sheet.

Abstract This article focuses on a provision of preferred stocks on a balance sheet. Preferred stock may have other rights and features. Examples are the redemption right, protection through maintenance of minimum net current assets or minimum ratio of current assets to current liabilities, protection through a sinking fund. The purpose of a balance sheet is to show the correct financial condition of a business as of a given date, stock preferences should be expressed in as much detail as is essential to fulfill this purpose. Further, as preferred stock is shown as a part of net worth, the problem of expressing preference's narrows down to a discussion of the net worth section of the balance sheet. Net worth, in its simplest form, consists of one kind of stock and surplus.