Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

9. Current Liabilities

Types of Liabilities

Financial Accounting

9. Current Liabilities

Types of Liabilities

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Multiple Choice

Which one of the following types of securities has the lowest priority in a bankruptcy proceeding?

Unsecured bonds

Secured bonds

Preferred stock

Common stock

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Verified step by step guidance

Understand the concept of priority in bankruptcy proceedings: In a bankruptcy, the company's assets are distributed to creditors and stakeholders based on a priority hierarchy. This hierarchy determines who gets paid first and who gets paid last.

Learn the order of priority: Secured creditors (e.g., holders of secured bonds) are paid first because their claims are backed by collateral. Unsecured creditors (e.g., holders of unsecured bonds) are next in line, followed by preferred stockholders, and finally common stockholders.

Recognize the characteristics of common stock: Common stock represents ownership in a company but does not have any claim to specific assets or guaranteed dividends. In bankruptcy, common stockholders are the last to be paid, and they often receive nothing if the company's assets are insufficient to cover higher-priority claims.

Compare the securities listed in the problem: Secured bonds have the highest priority because they are backed by collateral. Unsecured bonds come next as they are not backed by collateral but still have a higher claim than equity holders. Preferred stockholders have priority over common stockholders but are subordinate to bondholders.

Conclude that common stock has the lowest priority in bankruptcy proceedings: Common stockholders are residual claimants, meaning they are paid only after all other claims (secured bonds, unsecured bonds, and preferred stock) have been satisfied.