Preferred stock represents a special type of ownership interest in the firm. Preferred stockholders must receive their stated dividends prior to the distribution of any earnings to common stockholders and bondholders.

Question

Quizplus · Accepted Answer

Preferred stockholders receive dividends before common stockholders, but bondholders have a higher claim on earnings and assets than both preferred and common stockholders.

Preferred Stock Represents a Special Type of Ownership Interest in the Firm