Which type of stock ranks last in line during a liquidation process?

In the context of a liquidation process, common stock ranks last in line when it comes to asset distribution. During liquidation, a company’s liabilities are repaid first, which includes debts to creditors and any other financial obligations. Once all of these debts have been settled, preferred stockholders are next in line since they have a higher claim on assets compared to common stockholders.

Common stockholders, who are typically the last to be paid, only receive any remaining assets after the claims of debt holders and preferred stockholders have been fully satisfied. This hierarchy is an essential concept in understanding the risk and reward associated with different types of equity investments. Common stock, while offering ownership and potential for dividends, carries the highest risk because in a liquidation scenario, there may be little to nothing left for common stockholders after all obligations have been met.