Question

select the statement that is true of common stock.
common stock has a stronger claim to a companys assets than preferred stock.
companies issue dividends to common stockholders before preferred stockholders.
common stockholders do not have a right of first refusal when new stock is issued.
despite having fewer financial protections, common typically outperforms preferred stock.

Explanation:

• Analyze each option:
• Option 1: Preferred stock has a stronger claim to assets than common stock, so this is false.
• Option 2: Dividends are issued to preferred stockholders before common stockholders, so this is false.
• Option 3: Common stockholders do have a right of first refusal in some cases when new stock is issued, so this is false.
• Option 4: Common stock has fewer financial protections (like fixed dividends, priority in assets) but often has higher growth potential and typically outperforms preferred stock over time, so this is true.

Answer:

Despite having fewer financial protections, common stock typically outperforms preferred stock.