Which of the following is not a characteristic of common stock?

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Question: Which of the following is not a characteristic of common stock?

Option 1: has no maturity
- This is a true characteristic of common stock. Unlike bonds or debt instruments, common stock does not have a set maturity date. Investors hold shares for an indefinite period, hoping for appreciation and possible dividends.

Option 2: pays fixed dividends
- This is not a characteristic of common stock. Common stock dividends are variable and depend on company profits and board decisions. Paying fixed dividends is more typical of preferred stock, which often has a set dividend rate.

Option 3: has the lowest priority to claim the asset in case of bankruptcy
- This is a true characteristic of common stock. In liquidation, common shareholders are last in line after creditors and preferred shareholders, meaning they have the lowest claim on remaining assets.

Option 4: has voting rights
- This is also a true characteristic. Most common shares carry voting rights, allowing holders to vote on corporate matters such as the election of directors and other major policies.

Summary: Among the options, the statement that does not describe a characteristic of common stock is that it pays fixed dividends, since fixed dividends are associated with preferred stock rather than common stock.

MSB-250-300-002 Topic 7 Quiz

Which of the following is not a characteristic of common stock?

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MSB-250-300-002 Topic 7 Quiz

Which of the following is not a characteristic of common stock?

View Explanation

Log in for full answers

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