Which instrument provides fixed dividends and has priority over common stock in profits?

Which instrument provides fixed dividends and has priority over common stock in profits?

• A. Common Stock
• B. Preferred Stock
• C. Debt Securities
• D. Leases

Answer: (B)

Fixed dividends and priority over common stock in profits describe preferred stock. It pays a set dividend and has priority for distributions before any payments to common shareholders. In the event of liquidation, preferred shareholders typically have a higher claim on assets than common stockholders, though they remain behind debt holders. This combination—income-like, fixed payments with an equity ownership claim—fits preferred stock best. Common stock does not guarantee fixed dividends and carries residual ownership rights; debt securities provide fixed interest and principal but are creditors, not owners; leases are contractual arrangements and don’t involve dividends or ownership.

Fixed dividends and priority over common stock in profits describe preferred stock. It pays a set dividend and has priority for distributions before any payments to common shareholders. In the event of liquidation, preferred shareholders typically have a higher claim on assets than common stockholders, though they remain behind debt holders. This combination—income-like, fixed payments with an equity ownership claim—fits preferred stock best. Common stock does not guarantee fixed dividends and carries residual ownership rights; debt securities provide fixed interest and principal but are creditors, not owners; leases are contractual arrangements and don’t involve dividends or ownership.