Multiple Choice
Which of the following is NOT a potential feature of preferred stock?
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12. Stockholders' Equity
Preferred Stock
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Which of the following is NOT normally a preference given to the holders of preferred stock?
A
Preference in the distribution of assets upon liquidation
B
Preference in voting rights at shareholders' meetings
C
Preference in receiving dividends before common shareholders
D
Cumulative dividend rights
Verified step by step guidance1
Understand the concept of preferred stock: Preferred stock is a type of equity security that typically provides certain advantages over common stock, such as priority in receiving dividends and priority in asset distribution upon liquidation.
Review the typical preferences associated with preferred stock: These include preference in receiving dividends before common shareholders, cumulative dividend rights (if applicable), and preference in the distribution of assets upon liquidation.
Analyze the given options: Compare each option to the typical preferences of preferred stock. Note that preferred stockholders generally do not have voting rights at shareholders' meetings, which is a key distinction from common stockholders.
Identify the exception: The question asks for the preference that is NOT normally given to preferred stockholders. Based on the analysis, preference in voting rights at shareholders' meetings is not a typical feature of preferred stock.
Conclude the reasoning: Preferred stockholders usually have financial preferences but lack voting rights, making 'Preference in voting rights at shareholders' meetings' the correct answer to the question.
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