A corporation selling stock is obligated to:
A)guarantee the shareholders' investment.
B)repay money obtained from the sale of that stock.
C)repurchase shares of stock at a later date.
D)pay dividends to the common shareholders.
E)pay dividends to preferred stockholders prior to common stockholders.

Question

Quizplus · Accepted Answer

When a corporation sells stock, it is obligated to pay dividends to preferred stockholders prior to common stockholders. This is because preferred stock is considered a more secure investment, as it typically guarantees a fixed dividend payment and preference in case of liquidation. Therefore, the corporation must prioritize these payments to maintain investor confidence and attract future investments.

A Corporation Selling Stock Is Obligated To