In case of bankruptcy and liquidation of assets,what is the order of the claimants?

Question

Quizplus · Accepted Answer

In case of bankruptcy and liquidation of assets, the order of claimants is as follows:

1. Debt holders - They have the first claim on the assets as they have lent money to the company and are owed by the company. 
2. Preferred shareholders - They have the next claim on the assets after the debt holders as they have a preference over equity shareholders in terms of receiving their money back. 
3. Equity holders - They have the last claim on the assets after the debt holders and preferred shareholders have been paid. As they are the owners of the company, they get the residual value left after paying off all the debts and preferred shareholders.

Therefore, the correct choice is B - Debt holders, preferred shareholders, equity holders.

In Case of Bankruptcy and Liquidation of Assets,what Is the Order