Final answer:
Debt holders or creditors have the first claim on a corporation's assets in the event of liquidation, before any distributions to shareholders. Preferred stockholders are paid before common stockholders, but still after debt holders. Management does not have a claim on the residual corporate value, which belongs to shareholders.
Step-by-step explanation:
In terms of claims on corporate value, the statement that debt holders have first claim is true. When a corporation faces liquidation or bankruptcy, the law stipulates that debt holders, or creditors, must be paid first. This is because they have provided debt financing to the company and thus have a priority claim on the company's assets. Only after all debts have been satisfied do shareholders receive any remaining value. Preferred stockholders have a priority claim over common stockholders, but they still stand behind debt holders in priority. Management does not have a separate or specific claim on any remaining value after debt and equity holders; any residual value belongs to the shareholders, not management.
For instance, if a company decides to issue bonds or take on debt, it is legally obligated to make interest payments to bondholders, as represented by the coupon rate. This claim to payment takes precedence over payments to stockholders, such as dividends, which the company may elect to pay if it wishes and has sufficient profits.