Question

What is true about preferred stocks?

Answer 1

Common stock provides for a fixed dividend. In most cases, preferred stockdividends are paid out after common dividends. ... Both represent ownership, thoughpreferred stock represents a higher level of ownership because in a liquidationpreferred stockholders are paid before commonstockholders.

Answer 2

Answer:

The preferred stock is an stock that gives the holder an extra privilege, usually of an economic nature, with respect to what we commonly know as ordinary shares. For example, the holder of a preferred stock has a higher hierarchy in the collection of dividends or in the distribution of the remaining assets in the event of bankruptcy by the company.

In case there are assets in liquidation, the hierarchy in the collection is better for the preferred shareholder than for the ordinary shareholder.

The responsibility of the ordinary shareholder is always limited, however, that of the preferred shareholder may not always be so under certain conditions.