Question

which of the following is true of both common stock and preferred stock? they both have priority over creditors when receiving payment after bankruptcy. they both rank below creditors when receiving payment after bankruptcy. they both always have voting rights which enable influence over corporate decisions. they both never have voting rights and do not influence corporate decisions.

Explanation:

1. Analyze the first option: Creditors have priority over stockholders (both common and preferred) in bankruptcy, so this is false.
2. Analyze the second option: In bankruptcy, creditors are paid first, then stockholders (common and preferred) are paid from remaining assets, so both rank below creditors. This is true.
3. Analyze the third option: Preferred stock often has no or limited voting rights, so "always" having voting rights is false.
4. Analyze the fourth option: Common stock typically has voting rights, so "never" having voting rights is false.

Answer:

B. They both rank below creditors when receiving payment after bankruptcy.