Bondholders must be paid before stockholders share in the earnings.

Name: Bondholders must be paid before stockholders share in the earnings.
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Question

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Bondholders are creditors of a company and have priority over stockholders (equity holders) when it comes to claims on a company's assets and earnings. Bondholders are entitled to receive fixed interest payments before any dividends can be distributed to stockholders.

Bondholders Must Be Paid Before Stockholders Share in the Earnings