Preferred and Common Stock Quiz

Which of the following is a key feature of preferred stock?

• It gives shareholders voting rights in corporate decisions.

• It offers a fixed dividend that must be paid before dividends to common stockholders.

• It provides capital gains at a higher rate than common stock.

• It is always convertible into common stock.

What is meant by "cumulative" preferred stock?

• Preferred stock that is paid in installments.

• Preferred stock where unpaid dividends accumulate and must be paid in the future.

• Preferred stock that can be converted to common stock.

• Preferred stock that gives the holder voting rights.

Which of the following is true about preferred stock in a liquidation scenario?

• Preferred stockholders are paid after common stockholders.

• Preferred stockholders have the same priority as bondholders.

• Preferred stockholders are paid before common stockholders.

• Preferred stockholders lose their investment if the company is liquidated.

Preferred stockholders typically have a higher or lower claim on company assets compared to common stockholders?

• Higher.

• Lower.

• Equal.

• Preferred stockholders have no claim.

Preferred stock usually does not provide:

• Fixed dividends.

• Voting rights in corporate decisions.

• Priority over common stockholders for dividends.

• Accumulating dividends for unpaid years.

Preferred stockholders are typically entitled to receive fixed dividends before common stockholders.

• True

• False

Preferred stockholders always have voting rights in shareholder meetings.

• True

• False

The dividend rate for preferred stock is typically fixed, but it may be adjusted over time.

• True

• False

Preferred stock is considered less risky than common stock, but it offers limited potential for capital appreciation.

• True

• False

Non-cumulative preferred stock does not accumulate unpaid dividends.

• True

• False