More generally, liquidation preference can also refer to the repayment of creditors (such as bondholders) before shareholders if a company goes under. The company will sell its assets, then use that money to repay senior creditors first, then junior creditors, then shareholders. Though creditors have a better chance of being repaid in the event of a liquidation, their lower risk comes with a lower reward. Creditors generally earn interest on their loans at a lower rate than the returns shareholders receive on their investments.
Investment dictionary. Academic. 2012.
Look at other dictionaries:
liquidation preference — USA A right entitling holders of preferred stock to be paid the principal amount (or original issue price), or some multiple, of their investment (typically plus all accrued and unpaid dividends on the preferred stock) before holders of common… … Law dictionary
Involuntary liquidation preference — A premium that must be paid to preferred or preference stockholders if the issuer of the stock is forced into involuntary liquidation. The New York Times Financial Glossary … Financial and business terms
involuntary liquidation preference — A premium that must be paid to preferred or preference stockholders if the issuer of the stock is forced into involuntary liquidation. Bloomberg Financial Dictionary … Financial and business terms
involuntary liquidation preference — Fin a payment that a company must make to holders of its preferred stock if it is forced to sell its assets when facing bankruptcy … The ultimate business dictionary
liquidation — index aberemurder, assassination, cancellation, composition (agreement in bankruptcy), discharge (payment), dispatch (act of putting to death) … Law dictionary
preference — pref·er·ence / pre frəns, fə rəns/ n 1: the right to prior payment of a debt with preference over the creditors of the heirs or legatees Louisiana Civil Code 2: the transfer of an insolvent debtor s interest in property to a creditor for an… … Law dictionary
Liquidation — Winding up redirects here. For other uses, see Wind up (disambiguation). Not to be confused with liquification, a concept in physics. In law, liquidation is the process by which a company (or part of a company) is brought to an end, and the… … Wikipedia
preference share — preferred shares of a corporation that have first claim to preferred dividends. Bloomberg Financial Dictionary A type of share that pays a fixed percentage dividend. Preference shareholders come before the ordinary shareholder when it comes to… … Financial and business terms
preference share — A share in a company that is entitled to a fixed percentage dividend rather than a variable dividend; for example, a 6% preference share pays a dividend of 6% per annum. If the company goes into liquidation, the preference shares are paid out… … Accounting dictionary
preference share — A share in a company yielding a fixed rate of interest rather than a variable dividend. A preference share is an intermediate form of security between an ordinary share and a debenture Preference shares usually confer some degree of ownership of… … Big dictionary of business and management