Question

When comparing common stock of the same company, it is fair to say:

A. that all shares, no matter how many classes, are all created with the same equal rights

B. companies sometimes have two different classes of shares with unequal rights to dividends and votes

C. the Securities and Exchange Commission allows only one class of common stock

D. investors are indifferent between class A and class B shares

Answer 1

Sol:

When comparing common stock of the same company, it is fair to say companies sometimes have two different classes of shares with unequal rights to dividends and votes.

Answer is B. it is fair to say companies sometimes have two different classes of shares with unequal rights to dividends and votes.

Common stock is usually divided into different classes including Class A and Class B shares. Class A shares are normally superior to Class B shares. Different share classes also have different voting and dividend rights. For instance, a company's founders, executives, or other large stakeholders may be assigned a class of common stock that has multiple votes for every single share of stock. Super-voting shares give key company insiders greater control over the company's voting rights, its board, and corporate actions.Also creating different share classes in this way might allow dividends to be paid to some shareholders but not to others.