Question

Which of the following statements is true?

		When a company goes bankrupt, common stockholders are the first to get paid.
		A preferred stock promises investors a fixed stream of dividend payments.
		Holders of preferred stocks have residual claim on the company’s assets and cash flows.
		Investing in a bond of a company is riskier than investing in a stock of the same company.

Answer 1

Following is the one and only true statement

• A preferred stock promises investors a fixed stream of dividend payments.

It is true because preferred stocks as compared to common stocks gets fixed stream of dividend. Or they get a preference in getting dividend. But they have no voting rights.

1st statement is false because When a company goes bankrupt, common stock holders are the last to get paid. Actually the secured creditors get paid first. Then the unsecured creditors, At last the general creditors when ch include common stock & preferred stock holders out of which preferred stock holders get paid first and common stock holders are paid last.So that the common stock holders are the one who get residual claim on company's assets and cashflow so the the 3rd statement is also false.

4th statement is also false because ,As n investor bond of a company are less riskier than stocks. Because bonds offer reliable return. Whereas stocks have no guarnteed returns and have high risk.