Question

Assume that a firm had such serious financial problems that it was about to be liquidated after a bankruptcy. All of the firm's assets are about to be sold in order to pay the following claims against the firm: bondholders, preferred stockholders, common stockholders, and federal income taxes. Of the claims mentioned, what priority would common stockholders have?

Answer 1

The common stockholders would have the fourth which is also the last priority.

Step-by-step explanation:

First of all,the federal income taxes tops the priority list as the debt is owed to the national government and it is of utmost importance as far the bankruptcy code is concerned.

The second priority goes the bondholders as clearly stated in their convenant deed with the company that bondholders would be settled first upon company's liquidation after settlement of debt owed to higher authority

The preferred stockholders take precedence over common stockholders who occupy the fourth position