If the net worth (assets - liabilities) of a company is 100,000, and there are a 100 shares outstanding, then in the event of bankruptcy, if I hold 1 share of the company, am I guaranteed to get: 100,000/100 = 1000 $?

Is it true that after bankruptcy, the assets will be liquidated and divided among the shareholders? That is how I came up with the math.

  • Do you mean bankruptcy (where it can't pay its debts) or some kind of voluntary liquidation (where it's wound up for some other reason)? It's unlikely though not impossible for there to be net assets left in a bankruptcy. – GS - Apologise to Monica Apr 29 '15 at 20:26
  • Hmm...never thought of that...I guess I mean when a company is closing shop because of too many losses. – Victor123 Apr 30 '15 at 13:48

All investors of equal standing get the same proportion of the net assets on bankruptcy but not all shareholders are of equal standing. In general, once all liabilities are covered, bond holders are paid first as that type of investment is company debt, then preferred stock holders are paid out and then common shareholders. This is the reason why preferred stock is usually cheaper - it is less risky as it has a higher claim to assets and therefore commands a lower risk premium. The exact payout schedule is very corporation dependent so needs research on a per firm basis.

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