How do common stocks differ from preferred stocks?

Common stocks generally provide voting rights to their owners, allowing them to participate in the decision-making processes of the company, such as voting on board members and major corporate actions. This aspect of common stocks is significant because it gives shareholders a voice in the company’s operations and direction.

In contrast, preferred stocks typically do not come with voting rights. They are considered a hybrid security, combining features of both debt and equity. Preferred shareholders usually receive fixed dividends and have a higher claim on assets than common shareholders if the company undergoes liquidation, but they lack the ability to vote at shareholder meetings.

The distinction in voting rights is a fundamental characteristic that sets common stocks apart from preferred stocks, making option C the correct choice. This highlights the varying levels of influence and potential benefits linked to ownership of these two types of securities.