Which of the following is a difference between common stock and bonds?
A) Bondholders have a voice in management; common stockholders do not.
B) Bondholders have a senior claim on assets and income relative to stockholders.
C) Stocks have a stated maturity but bonds do not.
D) Dividend paid to stockholders is tax-deductible but interest paid to bondholders are not.

Question

Quizplus · Accepted Answer

Bondholders have a senior claim on assets and income relative to stockholders. This means that if a company goes bankrupt or liquidates, bondholders will receive payment before common stockholders do. A is incorrect because bondholders generally do not have a voice in management. C is incorrect because it is the opposite - bonds have a stated maturity while stocks do not. D is incorrect because interest paid to bondholders is tax-deductible while dividends paid to stockholders are not.

Which of the Following Is a Difference Between Common Stock