Participating Preferred Stock: Definition & Example


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question 1 of 3

Identify the type of preferred stock that could potentially receive dividends in excess of its stated dividend rate.

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1. Select the reason why participating preferred stock might receive higher dividends than its stated dividend rate.

2. Identify the reasons why venture capitalists favor participating preferred stock.

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About This Quiz & Worksheet

Our quiz/worksheet combo helps you test your knowledge of participating preferred stock. The short multiple-choice questions found here ask you about why preferred stock is used and in what kinds of situations it might receive higher dividends.

Quiz & Worksheet Goals

This quiz is designed to help you:

  • Detail the kind of preferred stock that may receive dividends above its dividend rate
  • Explain why this stock might receive higher dividends
  • Discuss why venture capitalists might choose participating preferred stock
  • See if you can calculate the dividend a participating preferred stock might receive in several example problems

Skills Practiced

  • Making connections - use understanding of the concept of how participating preferred stock dividends work
  • Knowledge application - use your knowledge to answer questions about why venture capitalists like participating preferred stock
  • Reading comprehension - ensure that you draw the most important information from the related participating preferred stock lesson

Additional Learning

Be sure to check out our lesson titled Participating Preferred Stock: Definition & Example for more information about this subject. Once you complete this lesson, you should be able to:

  • Explain why participating preferred stock is different from common stock
  • Describe how preferred stock is treated in a liquidation
  • Detail what happens to preferred stock in the case of a sale of the business