when a company liquidates
if a business chooses to liquidate all of the company assets are sold and its creditors and shareholders have claims on its assets secured creditors have the first priority because their debts were collateralized with assets that can now be sold in order to repay them other creditors including suppliers bondholders and preferred shareholders are repaid before common shareholders a low level of debt means that shareholders are more likely to receive some repayment during a liquidation however there have been many cases in which the assets were exhausted before shareholders got a penny 