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Please do confirm these for me
Creditor is the one who has given or lend money to the company
So in decreasing order of risk for the creditor
Ordinary shares
Preference shares
Trade payables
Unsecured debt
Secured debtThe company on the other hand is the debtor and so the company should use
Retained earnings first then
Ordinary shares
Preferncee shares
And then debt
Right ?The first part of what you have written is correct.
However the second part of what you have written does not make sense. Firstly the company is not the debtor – shareholders etc do not owe money to the company. The only relevance is if the company goes into liquidation but the order in which the creditors are paid is subject to the law and is Paper LW and is nothing to do with Paper FM.
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