Which of the following describes a key characteristic of common shares compared to preferred shares for an investor?

Question: Which of the following describes a key characteristic of common shares compared to preferred shares for an investor?

Answer options:

• Common shares offer a fixed dividend payment and priority in liquidation. ✅ Common shares typically have voting rights and greater potential for capital appreciation.
• Common shares are considered a debt instrument and pay interest.
• Common shares are always convertible into preferred shares at the investor's discretion.

Correct answer: Common shares typically have voting rights and greater potential for capital appreciation.

Explanation: Common shares typically provide voting rights, allowing shareholders to influence company management, and offer higher potential for capital gains, while preferred shares often have fixed dividends and priority during liquidation.