Which of the following is true of a common stock?
A) It gives voting rights which permit determination of the amount of dividend receivable.
B) It gives claims on income and assets which are superior to the claims of creditors of the firm.
C) Dividends on common stock are fully tax-deductible.
D) There is no fixed dividend payment obligation for the company.

Question

Quizplus · Accepted Answer

Common stock does not have a fixed dividend payment obligation for the company. Dividends are determined by the board of directors and can fluctuate depending on the financial performance of the company. A) and B) are incorrect because while common stock does provide voting rights, these rights do not determine the amount of dividend to be paid. Additionally, claims on income and assets are actually subordinate to those of creditors. C) is incorrect because dividends on common stock are not tax-deductible for the issuing company.

Which of the Following Is True of a Common Stock