Question

1-A stakeholder is a party that has an interest in a company and can either affect or be affected by the business. Discuss at least two types of stakeholder

Answer 1

Here we take the two type of stake holders are as follows :-

1. Equity share holders or common stock holders.

2. Preferential share holder or preferred stock holders.

These share holders will affect the bussiness in following ways :-

1. They have voting rights and by using that they can be a part of decision making of the company.

2. The share holders can call for the emergency general meetings by using their rights.

3. They effect bussiness by asking more cash dividend and to distribute all the available retained earnings to them.

4. The preferential share holders has to get paid a fixed return in every situation of the company example the company has to pay dividend irrespective of profits and losses to the preference shareholders so this may become burden to management.

5. And also after payment of fixed amount as dividend the preferential share holders can ask for more dividend is there is any retained earnings after distributing of dividend to the equity share holders.

6. These share holders effects the market value of the share through trading them in stock exchanges.

7. Some of the shareholders may also do gambling with this shares and that gambling may leads to loss of name and fame of company in market.

Now we discuss about how these share holders are affected by the company

1. The company gives a part of ownership to the shareholders so that they have to attend general meeting irrespective of their work.

2. The company sometimes may declare and may not declare the dividend .

3. Declaration of dividend may affect the shareholder in positive and nagetive ways like if more dividend is issued then it shows positive effect and if no dividend is issued it shows negative effect.

4. Suddenly the company may get into liquidation then the amount invested in that company by shareholders has to face risk .

5. If the company goes to merger them also the investment may get depreciated or appreciated in the process of merger.

6. Company may issue bonus shares and share split to the share holders and also perform internal reconstruction in all these cases the value of investment may get increased or decreased.

7. The company may issue stock option plan to employees this lead to increase in number of share of the company and this may cause decrease of value of shares in outsider equity and preference share holders.

These are all the information about the effects of company towards share holders and effects of share holders towards company.

I hope, all the above mentioned points, explanation and example are useful and helpful to you.

Thank you.