Which of the following is usually a right of a preferred stockholder?
A) right to convert shares to common stock on demand
B) preemptive right to participate in the issuance of new common shares
C) right to receive dividend payments before any dividends are paid to common stockholders
D) right to sue company in bankruptcy proceedings if promised preferred dividends are not paid

Question

Quizplus · Accepted Answer

Preferred stockholders generally have a right to receive dividend payments before common stockholders. This preference for dividend payments is one of the main features of preferred stock.

Option A is a feature of convertible preferred stock, which is not necessarily a right of all preferred stockholders.

Option B refers to a preemptive right, which is the right to maintain ownership percentage by purchasing additional shares before they are offered to the general public. This is a right that is typically associated with common stock, not preferred stock.

Option D is not a right typically associated with preferred stockholders. Instead, this is more likely a right of bondholders in the event of a bankruptcy.

Which of the Following Is Usually a Right of a Preferred