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.

Question

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In the event of bankruptcy, preferred stockholders have priority over common stockholders with respect to liquidating proceeds, meaning they are paid out before common stockholders.

Preferred Stockholders Have Priority Over Common Stockholders with Respect to Dividends