Which stock has priority in dividends and liquidation but is generally nonvoting?

• A. Common Stock
• B. Par Value
• C. Preferred Stock
• D. Treasury Stock

Answer: (C)

Preferred stock is designed to provide income with a higher claim than common stock. It has priority over common stock for both dividends and assets in liquidation, meaning preferred shareholders are paid before common shareholders if profits are distributed or the company is liquidated. Dividends on preferred stock are typically fixed, and many issues are cumulative, so any missed payments accumulate and must be paid before any common dividends. In liquidation, after creditors are paid, preferred stockholders are paid next, before common stockholders, but they generally do not have voting rights. This combination of priority for dividends and liquidation, coupled with nonvoting characteristics, distinguishes preferred stock. Common stock usually carries voting rights and pays dividends only after preferred obligations are satisfied. Par value is just a nominal value, not a stock type, and treasury stock refers to company shares that have been repurchased and held, which typically carry no voting or dividend rights.