Canadian Securities Course (CSC) Practice Exam

Preferred shares indeed offer distinct advantages over common shares, particularly regarding dividend structures. Preferred shares usually provide a fixed dividend, which means that holders of preferred shares have a more predictable income stream compared to common shares, which do not guarantee dividends and can be more volatile. This fixed dividend is often prioritized over common dividends, meaning if a company faces financial trouble and has to reduce or eliminate dividends, preferred shareholders are more likely to receive payments before common shareholders.

The other choices illustrate concepts that do not accurately reflect the primary advantages that preferred shares hold over common shares. For instance, preferred shares do not typically offer higher potential for profit in the same way common shares can, as common shares can benefit more directly from a company's growth and profitability. Similarly, while preferred shares often do not carry voting rights, this characteristic is not necessarily seen as an advantage but rather a trade-off for the benefits they provide. Lastly, preferred shares do not guarantee capital appreciation; rather, they are often more stable but with limited growth potential compared to common shares, which can appreciate significantly in value over time.