Priority in Bankruptcy: Preferred stockholders have a higher claim on a company’s assets than common stockholders during liquidation. Common stockholders are residual claimants.
Dividend Priority: Preferred stockholders are entitled to fixed dividends before common stockholders receive any dividends.
Incorrect Options:
A & B: Common and preferred stocks are treated differently in bankruptcy and dividend payments.
C: Common stock dividends are subordinate to preferred stock dividends.
References:
SEC Guidance on Stockholder Rights:SEC Stock Rights.
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