Three dimensions
Separate voting, distribution formula or priority, and assets on termination. Priority in one dimension does not extend automatically to others; limited voting does not turn equity into a bond. The SEC distinguishes secured and unsecured debt and senior and subordinated obligations.[14](#source-cm-corporate) Preferred equity is not senior to every creditor and a payment percentage does not guarantee principal.
Conditional waterfall
If 1,400 units remain, creditors receive 1,000, preferred shares 300 and common shares 100. With 30 preferred and 100 common shares, that is 10 and 1 per share. Costs, disputes and extra ranks are omitted; this is not a bankruptcy procedure or a fair-price rule.
Payment and documents
Check the conditions creating the right, required decision and limits. Management policy is not an unconditional promise; past payments do not fix future terms. Record class, issue identifier, voting rights, distribution, termination, conversion and special events. See [shares](/guides/shares/), [dividends and total return](/guides/dividends-total-return/) and [identifiers](/guides/issuer-and-security-identifiers/).
Compare categories carefully
Ask what “better” means: votes, rank, formula or purchase price. Verify typical features in issue documents and separate an amount due under stated conditions from today’s market price.