A security that receives dividend payments prior to common shares, but it is subordinate to bonds is called a _________ stock.

Question

Quizplus · Accepted Answer

Preferred stock is a type of security that receives dividend payments prior to common shares. However, it is subordinate to bonds, which means bondholders have priority in receiving payments before preferred stockholders in case of bankruptcy or liquidation. Common stock (A) is subordinate to both preferred stock and bonds, while bond (B) and convertible (D) stocks are not subordinate to any other security. Senior stock (E) is not a commonly used term in finance.

A Security That Receives Dividend Payments Prior to Common Shares