Which of the following securities has a purely residual claim against a firm's cash flows?
A) preferred stock
B) callable bonds
C) common stock
D) non-callable bonds
E) None of the above.

Question

Quizplus · Accepted Answer

Common stock represents ownership in a company and has a purely residual claim on a firm's cash flows, meaning that shareholders only receive payments after all other obligations have been met (such as paying debt holders and distributing dividends to preferred stockholders). Preferred stock and bonds (both callable and non-callable) have a priority claim on a firm's cash flows and do not have a purely residual claim.

Which of the Following Securities Has a Purely Residual Claim