Which of the following describes a key characteristic of preferred shares?

Question: Which of the following describes a key characteristic of preferred shares?

Answer options:

• They typically offer voting rights proportionate to the number of shares held.
• Dividend payments are generally variable and depend on the company's profitability. ✅ They usually have priority over common shares for dividend payments and in liquidation.
• They are considered a short-term debt instrument with a fixed maturity date.

Correct answer: They usually have priority over common shares for dividend payments and in liquidation.

Explanation: Preferred shares usually have priority over common shares when it comes to dividend payments and during the liquidation of a company, but typically do not carry voting rights.