FBLA New Securities and Investments Exam 2025 – 400 Free Practice Questions to Pass the Exam

Preferred stock is designed to offer certain advantages over common stock, particularly in terms of dividend payments. A key feature of preferred stock is that it pays dividends to shareholders before any dividends are distributed to common stockholders. This priority in dividend payments means that if a company decides to issue dividends, preferred shareholders will receive their payments first, providing them with a more stable income stream.

Preferred stock typically does not come with voting rights, which are generally associated with common stock. While it often has a fixed dividend rate, it does not guarantee returns in the same way that debt might. Additionally, the risk associated with preferred stock can vary but it is generally considered to have a lower risk profile than common stock, since it has a higher claim on assets in the event of liquidation. Hence, option B is the correct answer as it accurately highlights the preferential treatment in dividend payment associated with preferred stock.