Preferred Stockholders Have Priority Over Common Stockholders with Respect to Dividends

question 2

True/False

Preferred stockholders have priority over common stockholders with respect to dividends, because dividends must be paid on preferred stock before they can be paid on common stock.However, preferred and common stockholders normally have equal priority with respect to liquidating proceeds in the event of bankruptcy.

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Definitions:

Circular Flow Diagram

A visual model of the economy that shows how money flows through markets among households and firms, illustrating economic interactions.

Payments

Transactions or transfers of money or equivalents as a form of settling a debt or fulfilling an obligation.

Factors of Production

The inputs used in the production of goods or services in the process of creating economic value, including land, labor, capital, and entrepreneurship.

Goods and Services

The tangible and intangible items that satisfy human wants and needs, which are produced and consumed by individuals and businesses.