Question

What are the two areas where preferred stockholders have greater rights relative to common stockholders?

Answer 1

Preferred stockholders have greater rights relative to common stockholders in dividends and liquidation.

Step-by-step explanation:

Preferred stockholders have greater rights relative to common stockholders in two areas: dividends and liquidation.

1. Dividends: Preferred stockholders have a higher priority when it comes to receiving dividends. They usually receive a fixed dividend payment before any dividends are distributed to common stockholders. In some cases, preferred stockholders may receive additional dividends if the company performs well. Common stockholders, on the other hand, receive dividends after preferred stockholders have been paid.

2. Liquidation: In the event of liquidation or bankruptcy, preferred stockholders have a higher claim on a company's assets compared to common stockholders. They are typically paid before common stockholders receive any proceeds from the liquidation process.

Answer 2

Preferred stockholders have greater rights relative to common stockholders in dividend payments and liquidation preferences.

Step-by-step explanation:

Preferred stockholders have greater rights relative to common stockholders in two areas: dividend payments and liquidation preferences.

Dividend Payments: Preferred stockholders have a higher priority when it comes to receiving dividends compared to common stockholders. They often have a fixed dividend rate, which means they receive a set amount of dividends before any dividends are paid to common stockholders. If the company cannot pay dividends in full, preferred stockholders will still receive their dividends while common stockholders may not receive any.

Liquidation Preferences: In the event of liquidation or bankruptcy, preferred stockholders have a higher claim on the company's assets compared to common stockholders. They have the right to receive their investment back before any remaining assets are distributed to common stockholders. This gives them greater protection and a higher likelihood of recovering their investment.