Question

In a liquidation bankruptcy, what is the order in which the proceeds of the liquidation are distributed? A Common Equity, Preferred Equity, Lenders B Preferred Equity, Lenders, Common Equity C Lenders, Common Equity, Preferred Equity D Lenders, Preferred Equity, Common Equity

Answer 1

Ans D Lenders, Preferred Equity, Common Equity

In a liquidation bankruptcy, the order in which the proceeds of the liquidation are distributed is Lenders, Preferred Equity, Common Equity.

Lenders are mostly secured and must be paid at first. Payment after lenders is made to the preferred equity and then to common equity holders.

Common equity holders comes at the last since they are considered the owners of the company and amounts pending if any after making payment to lenders, preference holders is made to common equity holders.