Question

Outline the differences between common stock and preferred stock.

Short answer

The stock owner have right to vote for major policy decisions.

The preferred stock owners must receive a specific amount of dividends.

Step-by-step solution

Introduction

The main distinction between common and preferred stock is that although preferred stock does not permit voting, common stock does. Because preferred shareholders require priority over a company's income, they receive dividends before common shareholders.

Explanation

The common stockholder seems to have the right to vote on important company policy decisions, which including board of director selections. Ordinary stockholders do not have voting rights, but they do own a piece of the company's income.

Special investors must receive a certain amount of dividend every period until common stockholders get anything.