Question

In: Finance

b. “Shareholders of corporate stock may have claims to a company’s assets and income.” Discuss and...

b. “Shareholders of corporate stock may have claims to a company’s assets and income.” Discuss and analyse this quote.

Solutions

Expert Solution

If we consider the Corporate stockholders , there are preference shareholders and common share holders.

Both the types of stockholders have claims to the company's assets and income.

Preference shareholders get a fixed dividend as share of company's income and the right of dividend preference shareholders is settled before paying dividends to common stockholders. The Common stockholders get a share of company's income in the form of dividend or in the form of share price appreciation.

However, the Preference stock holders get dividend only when there is available income and cash for dividend payment. For Common stock holders the dividend payment depends on the availability of surplus income after paying preference dividend as well as on the dividend policy of the company. Company is not legally bound to pay common stock dividend every year.

Both the types of shareholders have cliams on company's asset . In case of liquidation of company, the creditors have the first right to assets , followed by Bond holders, and then Preference shareholders. The claim of Common shareholders comes at the last in the sequence.


Related Solutions

Shareholders of corporate stock may have claims to a company’s assets and income.” Discuss and analyse...
Shareholders of corporate stock may have claims to a company’s assets and income.” Discuss and analyse this quote.
For each of the following events, identify the impact on a company’s assets, liabilities and shareholders’...
For each of the following events, identify the impact on a company’s assets, liabilities and shareholders’ equity: declare a dividend pay a dividend create a general reserve create a revaluation surplus make a bonus issue of shares make a rights issue of shares applied the lower of cost or net realisable value rule to some damaged inventory recognised taxation expense for the year (to be paid in the following year) a controlling interest in another company was acquired by purchasing...
IBM's income, assets, and stock price have been growing at an annual rate of 20% and...
IBM's income, assets, and stock price have been growing at an annual rate of 20% and are expected to continue to grow at this rate for 2 more years. They just paid a dividend of $2.00 and will continue to pay at the supernormal growth rate (20%) for the next two years. After that, dividends are expected to grow at the firm's constant growth rate of 8%. The required rate of return is 18%. The present value of the stock...
1.) Explain the process of stock redemption. 2.) Why do non-corporate shareholders prefer stock redemptions to...
1.) Explain the process of stock redemption. 2.) Why do non-corporate shareholders prefer stock redemptions to qualify for sale treatment? (tax implications) 3.) Describe the difference between liquidating and non-liquidating distributions from a partnership. 4.) The primary purpose of taxation is to create revenue for the federal government. What are three secondary purposes? 5.) What is the purpose of Domestic Production Activities Deduction (DPAD)?
B Corp. has net income of $3,000,000 and 2 million shares outstanding. The company’s stock trades...
B Corp. has net income of $3,000,000 and 2 million shares outstanding. The company’s stock trades at $32 per share. B Corp plans to repurchase $20,000,000 worth of stock. What is the EPS immediately following the repurchase? What is the P/E ratio?
Do corporate shareholders have an obligation to make certainthat their business corporations act in an...
Do corporate shareholders have an obligation to make certain that their business corporations act in an ethical and proper manner in conducting their business. Describe some example of companies that did not behave this way. What happens when a corporation does not act ethically? Please cite some examples.
1. In which type of corporate reorganization do shareholders receive stock in at least two other...
1. In which type of corporate reorganization do shareholders receive stock in at least two other corporations, in exchange for all of the stock in the original corporation? a."Type B" reorganization. b."Type A" consolidation reorganization. c."Type D" spin-off reorganization. d.Some other type of reorganization. e."Type D" split-off reorganization. 2. A tax free corporate reorganization can be utilized to: a.Create a subsidiary. b.Combine four corporations into one. c.Resolve management issues by dividing a company into three new companies. d.Transfer assets in...
Multilple choice Comprehensive income can be reported: a)on the income statement. b)in the shareholders’ equity section...
Multilple choice Comprehensive income can be reported: a)on the income statement. b)in the shareholders’ equity section of the balance sheet. c)on the statement of retained earnings. d)combined with the income statement.
ABC paid shareholders a high dividend relative to net income, it also repurchased stock (Treasury stock)...
ABC paid shareholders a high dividend relative to net income, it also repurchased stock (Treasury stock) over the past several years. The firm relied on debt to fund an increasing share of assets. Fully identify the potential advantages and risks of such a capital structure policy and how the growing medical and economic crisis enveloping the world as of 2020 will change, even if temporarily, such strategies.
Determining how Assets, Liabilities, Shareholders Equity, Revenue, Expense, and Net Income are understated, overstated, or not...
Determining how Assets, Liabilities, Shareholders Equity, Revenue, Expense, and Net Income are understated, overstated, or not affected by a company's action. Example: 1. A company did not record a sale made on account for services that have been provided. 2. The amount of cash a customer paid for a sale previously made on credit was understated. 3. The value of inventory purchased on account was understated. 4. Our company recently purchased inventory. The purchase of the inventory was recorded correctly;...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT