Which of the following is not true about common stock?

Question

BlackTom AI · Accepted Answer

Starting with the context, we are evaluating statements about common stock to identify which one is not true.
Option 1: 'Common stock holders are the owners of the firm.' This is accurate because ownership in a corporation is represented by common shares, giving holders equity in the company.
Option 2: 'Common stock comes with voting rights.' Typically true, as many common shares confer the right to vote on corporate matters, such as who sits on the board, making this a correct portrayal.
Option 3: 'Common stock pays a constant dividend.' This is not true in general. Dividends on common stock are not guaranteed and can vary or be omitted depending on profits, cash flow, and board decisions; there is no fixed, constant dividend obligation for common stockholders.
Option 4: 'Common stock holders are the last to get paid in the event of bankruptcy.' This reflects the common hierarchy where debt holders get paid first, followed by preferred stockholders, and finally common stockholders, so this statement is true.
Thus, the statement that is not true is the one about paying a constant dividend, because it misstates the nature of common stock dividends as variable and not guaranteed.

MSB-250-300-002 Proctored Final Exam

Which of the following is not true about common stock?

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