Mandatorily Redeemable Shares
Mandatorily Redeemable Shares
What are 'Mandatorily Redeemable Shares'
Mandatorily redeemable shares are shares owned by an individual or entity which are required to be redeemed for cash or another such property at a stated time or following a specific event. Mandatorily reedemable shares are often issued by employers as a sort of compensation kicker to employees; however, the employer would require the employees to redeem these shares for cash or bonds, for example in the case of certain prescribed events or timelines.
Explaining 'Mandatorily Redeemable Shares'
One example of a situation where an employer would issue manditorily redeemable shares would be in the case of an employee quitting the firm. The employer would excercise its "call" option on these shares forcing the exiting employee to sell back his or her company shares. An employer might do this in a situation where the shares are restricted and greatly in the money, or if it is a closely-held company with relatively few shares in float.
Mandatorily Redeemable Shares FAQ
What are mandatorily redeemable shares?
Mandatorily redeemable shares are shares of stock an individual or entity owns, which must be reclaimed by the issuer for cash or another such property at a stated time or following a specific event.
What is a redeemable stock?
Redeemable preferred stock is a preferred stock that allows the issuer to buy it back at a specific price and retire it. Also known as callable preferred stock, redeemable preferred stock can benefit issuers because it gives them more financial flexibility.
Are redeemable shares debt or equity?
A redeemable preference share, where the holder can request redemption, is accounted for as debt even though legally it may be the issuer's share.
How is redeemable preferred stock accounted for?
Redeemable preferred stock allows the issuer to buy back the stock at a certain price and retire it, thereby converting it to treasury stock. It pays dividends, as do other forms of equity, but it may also be bought back by the issuer, which is a characteristic of debt.
How is preferred stock reported on the balance sheet?
All preferred stock is reported on the balance sheet in the stockholders' equity section and it's the first to appear. The par value, authorized shares, issued shares, and outstanding shares is disclosed for each type of stock.
What is the difference between cumulative preferred stocks and noncumulative preferred stocks?
With cumulative preferred stock, the company must be aware of the dividends it chooses not to pay to its preferred shareholders. By contrast, if a company issues noncumulative preferred stock, its preferred shareholders have no future right to receive dividends that the company chooses not to pay.
Further Reading
elibrary.ru [PDF]
… This study integrates research from psychology and financial economics to make specific predictions of the differential effect of classifying a new issue of mandatorily redeemable preferred stock … a liability, owners'' equity, or between liabilities and owners'' equity(ie, "mezzanine …
link.springer.com [PDF]
… This study integrates research from psychology and financial economics to make specific predictions of the differential effect of classifying a new issue of mandatorily redeemable preferred stock … a liability, owners'' equity, or between liabilities and owners'' equity(ie, "mezzanine …
link.springer.com [PDF]
… This study integrates research from psychology and financial economics to make specific predictions of the differential effect of classifying a new issue of mandatorily redeemable preferred stock … a liability, owners'' equity, or between liabilities and owners'' equity(ie, "mezzanine …
onlinelibrary.wiley.com [PDF]
… This study integrates research from psychology and financial economics to make specific predictions of the differential effect of classifying a new issue of mandatorily redeemable preferred stock … a liability, owners'' equity, or between liabilities and owners'' equity(ie, "mezzanine …
www.tandfonline.com [PDF]
… This study integrates research from psychology and financial economics to make specific predictions of the differential effect of classifying a new issue of mandatorily redeemable preferred stock … a liability, owners'' equity, or between liabilities and owners'' equity(ie, "mezzanine …
onlinelibrary.wiley.com [PDF]
… This study integrates research from psychology and financial economics to make specific predictions of the differential effect of classifying a new issue of mandatorily redeemable preferred stock … a liability, owners'' equity, or between liabilities and owners'' equity(ie, "mezzanine …
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