Series 7 practice questioneasyEquity Securities — Common Stock — Liquidation Priority
In the event of a corporate liquidation, which of the following has the LAST claim on assets?
- ASecured creditors
- BUnsecured bondholders
- CCommon stockholders✓ Correct answer
- DPreferred stockholders
Explanation
Why C — Common stockholders
Common stockholders have the residual claim on corporate assets and are last in the liquidation priority. The order is: secured creditors, unsecured creditors (including bondholders), preferred stockholders, and finally common stockholders. This reflects the higher risk that common stockholders bear in exchange for greater potential upside.
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