Guaranteed Stock
Candlefocus EditorGuaranteed stock is a special class of preferred stock, offered by companies such as railroads and public utilities, where a third party guarantees that dividends will be paid. This form of stock helps companies maintain the value of their equity while still having the flexibility to pay dividends to the holders of the securities.
From a company's perspective, issuing guaranteed stock allows them to confidently issue preferred stock and retain some control over the financial results. Many companies that issue bonds also issue preferred stock to enhance the appeal among investors and establish an initial form of trust. The guarantees associated with preferred stock are safeguards in place which provide an additional layer of security to those investing in the preferred stock.
In some cases, guaranteed stock is also used to describe the physical inventory a company has available, particular in the retail industry. Guaranteed stock is any inventory a company has available for sale in advance of buying more. This means that the company has enough products on hand to complete sales when necessary. It is a critical component of the retail industry as it allows for timely delivery of products.
By having guaranteed stock, or a full supply of all of its inventory, a company can acquire an advantage over competitors who do not have all their products available. If a company has a particular product that is sought after, they can assure their product is available while the competitors do not. This gives them a great deal of power in terms of financial stability.
In conclusion, guaranteed stock is an important form of preferred stock, which allows a company to establish an initial trust with their investors. It also allows corporations to have full control over their financial performance and a competitive edge over their competitors. Having guaranteed stock also gives companies the assurance that their products will be readily available, increasing their chances of success in the industry they operate in.