Question: - Distinguish between common and preferred stock

Answer
As preferred shareholders have preference over a company's income, they receive
dividends before common shareholders.
Step-by-Step Solution
Step 1: Meaning of Common Stock
When people talk about stocks, they often mean common stock. Indeed, most stock is
issued as common stock. These shares represent ownership in a corporation and are
the type of stock in which people invest.
Step 2: Meaning of Preferred Stock
Unlike common stock, preferred stock has certain rights that are different from the right
s of common stock. For example, the preferred stock generally pays higher dividend
payments, and it has a greater claim to assets in case of company liquidation.

Step 3: Difference between common and preferred stock

1. Company ownership
A stake in the company is owned by holders of both common stock and
preferred stock.

2. Voting Rights
Preferred shareholders are non-voting since they own no shares in the
company. Despite the fact that both common investors and preferred investors o
wn shares, only the common investors have voting rights.

3. Dividends
For common stock, dividends may vary based upon the company's profitability.
However both shareholders may receive dividends, but dividends are
paid in different ways.

4. Claim to earn
The order in which investors are paid out depends on the earnings report. 
Bondholders receive payment first, and common shareholders are paid out
last. In addition to bondholders, preferred shareholders are paid out
after bond shareholders, but before common stockholders.

5. Conversion
It is possible to convert a fixed number of preferred shares into common shares,
but common shares cannot be converted into preferred shares.
6. Returns
Shares of common stock will typically produce returns based on changes in
share price, as well as an optional dividend. As opposed to preferred shares,
dividends are mostly responsible for the return on the preferred shares.