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Question 2. Short Answer Question Rank the following financing sources from the one with highest priority order to the one with lowest priority order: Common Stock; Senior Subordinated Debt: Preferred Stock; Bank Debt; Senior Unsecured Debt

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Answer #1

Following will be the order of financing sources;

1.

Common stock

2.

Preferred stock

3.

Bank debt

4.

Senior subordinate debt

5.

Senior unsecured debt

Explanation;

As we know that common stock is the primary source of capital which is shown in the balance sheet wheras preferred stock comes.

In case of loans funds, bank debt comes first then senior subordinate debt is shown after that senior unsecured debt comes.

That is why above given order will be correct order of financing source.

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