Owners of preferred stock in a company get first claim to its dividend

QUESTION

Owners of preferred stock in a company get first claim to its dividends and assets but are not allowed to vote on major company decisions.

Indicate whether the statement is true or false.

ANSWER

Answer: TRUE
Explanation: Preferred stock owners cannot vote on company decisions but do get preferred, or first, claim on company dividends as well as assets if the company goes bankrupt and assets are sold. One drawback is that preferred stock dividends are fixed, regardless of the company’s profitability.