Which best describes the difference between preferred and common stocks

Which of the following statements best describes preferred

Multiple Choice

  • Preferred stock holders are usually granted the right to vote
    only in the event that dividends due are fully paid to
  • If a corporation's articles allow redemption, the corporation
    can buy back preferred stocks even if the holders do not wish to
  • Preferred stock cannot be converted into common stock.
  • Redemption of preferred stocks is allowed irrespective of
    whether the cost would make the corporation insolvent or not.

Distributions of shares in the corporation itself are called

Multiple Choice

  • cash dividends
  • stock dividends
  • equity securities
  • property dividends



Preference shares are the shares of a company, in which the
company pays out dividends to these shareholders, before they pay
dividends to common shareholders.

On the other hand, common share holders have voting rights,
whereas preference shareholders do not have any voting rights.

Redemption of preference shares is the process where these
shareholders are repaid and the shares are bought back by the

Hence the correct answer is Option D) redemption is
allowed irrespective of whether the cost will make the company


A stock dividend is the dividend payment made to shareholders in
the form of shares rather than cash. In this case, the company will
distribute shares.

Hence the correct answer is Option b) Stock

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