Discuss Forum

1.

Which of the following securitiea has prior claim on income and assets?

  • A. Ordinary share
  • B. Ordinary share
  • C. Ordinary share
  • D. Ordinary share

Answer: Option C

Explanation:

  • Preference shares: These shares give their holders a prior claim on a company's income and assets compared to ordinary shares, meaning they are entitled to receive dividends before ordinary shareholders and will receive a higher priority payout if the company is liquidated. 
Why other options are incorrect:
  • Ordinary share: Ordinary shareholders have the lowest claim on a company's assets and income. They only receive dividends after all other claims, including preferred shareholders and debt holders. 
  • Bond: Bonds are debt instruments, which means they represent a loan to the company. Bondholders have a higher claim than ordinary shareholders but are typically lower in priority than preferred shareholders. 
  • Debenture: A debenture is a type of bond, so it also has a higher claim than ordinary shares but is lower than preferred shares.

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