Question

When a company has issued both preferred and common stock, the ____________ stockholders receive their dividends first. The _____________ stockholders receive dividends only if the total dividend is large enough to pay the _____________ shareholders first.

Answer 1

Preferred stockholders receive dividends before common stockholders, who only get dividends if the preferred shareholders are paid first. Decisions on stock issuance, dividends, and reinvestment are made by the company's board of directors.

Step-by-step explanation:

When a company has issued both preferred and common stock, the preferred stockholders receive their dividends first. The common stockholders receive dividends only if the total dividend is large enough to pay the preferred shareholders first.

Decisions about when a firm will issue stock, pay dividends, or re-invest profits are typically made by the company's board of directors, which represents the interests of shareholders.

In a public company, the decision-making process involves the board of directors and the shareholders through annual meetings and votes. In a private company, these decisions might be made by a smaller group of key stakeholders or individual owners.

However, the common theme is that such financial decisions are critical in determining the relationship between the company and its investors, influencing a company's capital structure and business direction.