In the event of the firm's bankruptcy
A) the most shareholders can lose is their original investment in the firm's stock.
B) common shareholders are the first in line to receive their claims on the firm's assets.
C) bondholders have claim to what is left from the liquidation of the firm's assets after paying the shareholders.
D) the claims of preferred shareholders are honored before those of the common shareholders.
E) a and d.

Question

Quizplus · Accepted Answer

Shareholders have limited liability, meaning they can only lose their original investment. In bankruptcy, preferred shareholders have priority over common shareholders in asset claims.

In the Event of the Firm's Bankruptcy