A preferred stockholder is sometimes referred to as a residual owner, since in essence he or she receives what is left-the residual-after all other claims on the firm's income and assets have been satisfied.

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Preferred stockholders have priority over common stockholders in terms of dividends and assets in the event of liquidation, but they do not have the residual claim that common stockholders do. Residual owners are actually common stockholders who receive what is left after all other claims, including those of preferred stockholders, have been satisfied.

A Preferred Stockholder Is Sometimes Referred to as a Residual