Preferred Stock refers to equity security which offers benefits and rights beyond those enjoyed by common stockholders in a business enterprise. Preferred stocks are ranked above common stocks and as a result, preferred stockholders are compensated before common stockholders. In business valuation analysis, preferred stocks are treated as near debt commitments and as a result to arrive at the fair market value of equity, business valuators deduct debt as well as preferred stocks from the enterprise value. The enterprise value is estimated by applying methods under the income approach, market approach and asset approach.