10
QuizMultiple Choice

Business Structures

Question 10 • * HSA 26-27 Economics

Which best describes the difference between preferred and common stocks?

Answer
A
Preferred stock allows shareholders to vote for a board of directors, while shareholders of common stock do not have voting rights.
B
Common stock gives shareholders one vote per share owned, while shareholders of preferred stock do not have voting rights.
C
Preferred stock gives shareholders priority for dividends distributed, while shareholders of common stock are not allowed dividends.
D
Common stock allows shareholders to get priority for dividends distributed, while shareholders of preferred stock are not allowed dividends.

Explanation

Common shareholders generally have voting rights, often one vote for each share they own. Preferred shareholders usually do not have voting rights, but they have priority over common shareholders when dividends are paid. So the best choice is that common stock gives shareholders one vote per share, while preferred stockholders generally do not have voting rights.

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