Asked by Stacie Batchelor on May 05, 2024
Verified
Common stockholders:
A) have a residual claim on both income and assets.
B) are last in line in the event of bankruptcy.
C) have a higher claim on assets than preferred stockholders.
D) Both a & b
E) All of the above
Residual Claim
A financial term referring to the right of shareholders to claim what remains of a company's assets after all debts have been paid in the event of liquidation.
Common Stockholders
Common stockholders are investors who own shares of a company's common stock, granting them the right to vote at shareholder meetings and receive dividends.
Bankruptcy
A legal proceeding involving a person or business that is unable to repay outstanding debts, providing for the reorganization or liquidation of the debtor's assets to pay off creditors.
- Familiarize oneself with the entitlements and assertions of common stockholders in a business organization.
Verified Answer
ZK
Zybrea KnightMay 08, 2024
Final Answer :
D
Explanation :
Common stockholders have a residual claim on both income and assets, which means that they are entitled to whatever remains after paying off all other claims such as debts and preferred stockholders. However, in the event of bankruptcy, they are last in line to receive payment after all other parties have been satisfied. Therefore, both option A and B are correct. Option C is incorrect because preferred stockholders have a higher claim on assets than common stockholders.
Learning Objectives
- Familiarize oneself with the entitlements and assertions of common stockholders in a business organization.