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What is the priority of claims on the corporation’s earnings held by (a) common stockholders, (b)...

What is the priority of claims on the corporation’s earnings held by (a) common stockholders, (b) bondholders, and (c) preferred stockholders?

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Answer #1

The priority of claims on the Corporate earnings is as follows :-

1. First of all, from the earnings interest component component is paid to the b) bond holders as they are the creditors to the business and they have to be returned with payment

2. After paying bond holders, if sufficient earnings are there, dividends are paid to the c) preferred stoke holders

3. After paying both of these and if there are significant earnings and if the board of directors agree to it, dividends are paid to the a) common stockholders. They are also called the residual owners of the business earnings

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