What are the examples of participating and non-participating observation?

Answer 1

Participating preferred stock is capital stock which provides a specific dividend that is paid before any dividends are paid to common stock holders, and which takes precedence over common stock in the event of a liquidation. This form of financing is used by private equity investors and venture capitalfirms. Holders of participating preferred stock get both their money back (with interest) and the money that is distributable with respect to the percentage of common shares into which their preferred stock can convert. The main benefit to owning preferred stock is that the investor has a greater claim on the company's assets than common stockholders. Preferred shareholders always receive their dividends first and, in the event the company goes bankrupt, preferred shareholders are paid off before the holders ofcommon stock. In general, there are four different types of preferred stock: cumulative preferred, non-cumulative, participating, and convertible.