The purchase of common stock gives the holder (a) rights to residual cash flows (b) access to monthly Board of Director's meetings (c) rights to a contractually set coupon (d) access to the CEO to assist in decision-making (e) rights to a good job with benefits

Question

Jayvon Peck

Business

29 May, 10:50

The purchase of common stock gives the holder (a) rights to residual cash flows (b) access to monthly Board of Director's meetings (c) rights to a contractually set coupon (d) access to the CEO to assist in decision-making (e) rights to a good job with benefits

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Davian Booth · Answer 1

The correct option is A, rights to residual cash flows

Explanation:

Residual cash flows in this sense refers to cash left after bondholders interests have paid as well as the preferred shareholders's dividends.

The equity shareholders are the ultimate bearers of risk in a company, hence they are seen as the real owners of corporations in that they queue behind other providers of finance for dividends payments.

Even sometimes, they are instead of receiving cash dividends availed script dividend or stock dividend where additional shares are issued to shareholders in lieu of cash dividend payments.