Multiple Choice QuestionPreferred stockholders receive:Multiple choice question.dividends after common stockholders.half the dividends of common stockholders.dividends before common stockholders.double the dividend of common stockholders.
Question
Multiple Choice QuestionPreferred stockholders receive:Multiple choice question.dividends after common stockholders.half the dividends of common stockholders.dividends before common stockholders.double the dividend of common stockholders.
Solution
The correct answer is: dividends before common stockholders.
Here's why: Preferred stockholders have a higher claim on the earnings and assets of a company compared to common stockholders. This means that if a company decides to pay dividends, preferred stockholders will receive their dividends before common stockholders. In the event of bankruptcy, preferred stockholders are also paid before common stockholders.
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