Question

If Cute Camel ever goes bankrupt, its common stockholders will be paid off first, then its debtholders and preferred stockholders. This statement is , because:

Answer 1

Answer: incorrect; This is because the common shareholders are typically treated as being residual investors.

Explanation:

From the question, we are informed that if Cute Camel ever goes bankrupt, its common stockholders will be paid off first, then its debtholders and preferred stockholders.

This above scenario is untrue. It should be noted that common shareholders are typically treated as being residual investors and therefore won't be paid off first.