Which characteristic is NOT associated with preferred stock?

Which characteristic is NOT associated with preferred stock?

• A. It has a fixed dividend
• B. The board of directors must declare the dividends
• C. It has a dividend that is not guaranteed
• D. It carries voting rights

Answer: (D)

Preferred stock is a type of equity security that typically has certain features distinguishing it from common stock and bonds. One of the key characteristics of preferred stock is that it usually does not carry voting rights. Preferred shareholders generally do not have a say in the company's management or corporate decisions, unlike common shareholders who do have voting rights. With preferred stock, dividends are generally fixed, providing a steady income stream for investors. However, the board of directors must declare the dividends, which means that while preferred stockholders often have a fixed dividend rate, actual payment is contingent upon the company's decision to distribute dividends. Furthermore, those dividends, although anticipated, are not guaranteed, particularly if the company faces financial difficulties or decides to reinvest profits rather than pay dividends. The characteristic of not carrying voting rights is essential to understanding the nature of preferred stock, making this option the correct answer to the question regarding which characteristic is NOT associated with preferred stock.

Preferred stock is a type of equity security that typically has certain features distinguishing it from common stock and bonds. One of the key characteristics of preferred stock is that it usually does not carry voting rights. Preferred shareholders generally do not have a say in the company's management or corporate decisions, unlike common shareholders who do have voting rights.

With preferred stock, dividends are generally fixed, providing a steady income stream for investors. However, the board of directors must declare the dividends, which means that while preferred stockholders often have a fixed dividend rate, actual payment is contingent upon the company's decision to distribute dividends. Furthermore, those dividends, although anticipated, are not guaranteed, particularly if the company faces financial difficulties or decides to reinvest profits rather than pay dividends.

The characteristic of not carrying voting rights is essential to understanding the nature of preferred stock, making this option the correct answer to the question regarding which characteristic is NOT associated with preferred stock.