Who has claims on a firm's income and assets after creditors, but before common stockholders?

Preferred stockholders have claims on a firm's income and assets after creditors but before common stockholders. This distinction is crucial in understanding the hierarchy of claims in a company's capital structure.

Creditors, which include both bondholders and debenture holders, are prioritized above all equity holders when it comes to claims on a firm’s assets and income, particularly during liquidation events or bankruptcy. They receive their payments first. Following the creditors, preferred stockholders have the next level of claims. They typically receive fixed dividend payments and have priority over common stockholders regarding the distribution of income and assets.

Common stockholders are last in line, meaning they only receive payouts after all other claims, including those of preferred stockholders, have been satisfied. This structure highlights the reduced risk for preferred stockholders compared to common stockholders, as preferred shares often come with more stable dividends and recourse in the event of financial difficulty.