Preferred stock has a claim on the firm that is senior to the bondholder claim and also senior to the common shareholder claim.

Name: Preferred stock has a claim on the firm that is senior to the bondholder claim and also senior to the common shareholder claim.
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Question

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Preferred stock has a claim on assets and earnings that is senior to common shareholders but junior to bondholders. Bondholders are paid before both preferred and common shareholders.

Preferred Stock Has a Claim on the Firm That Is