Question

In the context of C corporations, what is a difference between preferred stockholders and common stockholders?

a) Preferred stockholders have voting rights, while common stockholders don't.
b) Preferred stockholders have priority in receiving dividends.
c) Common stockholders have limited liability, while preferred stockholders don't.
d) Common stockholders have guaranteed returns on their investment.

Answer 1

Preferred stockholders and common stockholders have differences including voting rights, dividend priority, and liability.

Step-by-step explanation:

In the context of C corporations, there are several differences between preferred stockholders and common stockholders:

1. Voting Rights: Preferred stockholders typically do not have voting rights, while common stockholders usually have the right to vote on certain matters affecting the company.
2. Dividend Priority: Preferred stockholders have priority in receiving dividends. They receive a fixed dividend amount before any dividends are paid to common stockholders.
3. Liability: Both preferred and common stockholders have limited liability, meaning they are not personally responsible for the company's debts or obligations.