In the case of liquidation, common stockholders are paid first, followed by preferred stockholders, followed by bondholders.

Question

Quizplus · Accepted Answer

In the case of liquidation, bondholders are paid first, followed by preferred stockholders, and then common stockholders. This is because bondholders have a higher priority in terms of repayment of their investment, as they have a legal right to receive interest payments and to have their principal repaid before common or preferred shareholders receive anything.

In the Case of Liquidation, Common Stockholders Are Paid First