Preferred stock

Preferred stock is a class of ownership that sits between debt and common equity in a company's capital structure. It typically pays a fixed dividend, similar to interest on a bond, and holds a priority claim over common shareholders if the company is liquidated, but usually carries no voting rights and no share in profit above its fixed payment.

Because it behaves partly like debt and partly like equity, preferred stock needs its own line in a full valuation. A simple enterprise value calculation built only from market cap, debt, and cash leaves out any preferred stock outstanding entirely, understating what a buyer of the whole company would need to account for.