Business Structures — Quiz

Question 12 • Personal Finance and Economics

Which best describes the difference between preferred and common stocks?

Answer

Common stock gives shareholders one vote per share owned, while shareholders of preferred stock do not have voting rights.

Common stock allows shareholders to get priority for dividends distributed, while shareholders of preferred stock are not allowed dividends.

Preferred stock gives shareholders priority for dividends distributed, while shareholders of common stock are not allowed dividends.

Preferred stock allows shareholders to vote for a board of directors, while shareholders of common stock do not have voting rights.

Explanation

Common stock generally gives shareholders voting rights, often one vote per share, including votes for the board of directors. Preferred stockholders generally do not have voting rights, but they receive priority over common stockholders for dividends. Therefore, choice B best describes the difference.

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