The most important distinction between preferred stock and common stock is that:
A) owners of common stock are more likely to receive a dividend than owners of preferred stock.
B) owners of preferred stock are more likely to receive a dividend than owners of common stock.
C) while preferred stockholders are owners of a corporation, common stockholders are its creditors.
D) while common stockholders are owners of a corporation, preferred stockholders are its creditors.

Question

Quizplus · Accepted Answer

Preferred stockholders have a higher priority in receiving dividends compared to common stockholders. Common stockholders are typically last in line to receive dividends, after preferred stockholders and bondholders. Preferred stockholders also have a fixed dividend rate, whereas common stockholders do not have a guaranteed dividend rate.

The Most Important Distinction Between Preferred Stock and Common Stock