A true statement about preferred stock is:

Multiple Choice

• It would be foolish to purchase the common stock of a company that also issues preferred shares, because the preferred shares have a higher yield with a stronger guarantee.

• Preferred shareholders generally get enhanced voting rights.

• Preferred stocks are a hybrid between equity and debt, because like common stock the owners of preferred shares can vote and like debt they are paid interest.

• Dividends must generally be paid to preferred shareholders before dividends may be paid to common shareholders.

• All options are incorrect.