Question

Managers should act in shareholders' interests because shareholders have ___________ priority in receiving their claims.A. TopB. Somewhere in the middleC. BottomD. Equal (to those of all other stakeholders)

Answer 1

Regarding to Claim to income, the correct answer would be C-Bottom

Step-by-step explanation:

Shareholders can be preferred or common and they have differents claims to income. Generally, preferred stock will be given preference in assets to common assets in case of company liquidation, nonetheless both will fall behind bondholders if asset distribution happen. If bankruptcy happen, common stock investors will receive any remaining funds after bondholders, then creditors and preferred stockholders are paid. That's why these investors often receive nothing after a bankruptcy. Preferred stock also has the first right to receive dividends. In general, common stock shareholders will not receive dividends until it is paid out to preferred shareholders, and that happen because they are at the bottom of the pyramid.