Which of the following statements is true about common stock?
A) Common stock is considered to have a fixed maturity.
B) Owners of common stock are guaranteed dividend payment by the firm.
C) Owners of common stock have the lowest-priority claim on the firm's assets in the event of bankruptcy.
D) Common-stock holders have unlimited liability toward the obligations of the corporation.

Question

Quizplus · Accepted Answer

Owners of common stock have the lowest-priority claim on the firm's assets in the event of bankruptcy. This means that in case of liquidation, common stockholders are paid after all other claims, such as creditors and preferred stockholders, have been satisfied.

Options A, B, and D are incorrect because common stock does not have a fixed maturity, owners are not guaranteed dividend payments by the firm, and common-stock holders have limited liability towards the obligations of the corporation, respectively.

Which of the Following Statements Is True About Common Stock