Why do bond holders get paid first?

[etzmoi]

If common stockholders are the owners of the company, why do they have the last claim on assets and residual claim on income?

[ewand]

Bondholders, or preferred stockholders have a class of ownership in a corporation with a stated dividend that must be paid before dividends to common stock holders. Preferred stock does not usually have voting rights. Common stockholders A security that represents ownership in a corporation. Holders of common stock exercise control by electing a board of directors and voting on corporate policy. Common stockholders are on the bottom of the priority ladder for ownership structure. In the event of liquidation common shareholders have rights to a company's assets only after bond holders, preferred shareholders, and other debt holders have been paid in full. This makes common stock riskier than debt or preferred shares. The upside to common shares is that they usually outperform bonds and preferred shares in the long run.

[Hammer]

Common stockholders own the company, including the debts and liabilities, so they only get a share of what's left once everybody else has been paid.