Topic 2: If common stockholders are the owners of the company, why do they have the last claim on...

Question

Topic 2: If common stockholders are the owners of the company, why do they have the last claim on assets and a residual claim on income? Were stockholders and bondholders treated differently during the recent auto industry bailouts?

Topic 3:Explain the relationship between a company's growth possibilities and its dividend policy. How does the stockholder feel about this relationship and the relevance of dividends in general?

Robert · Accepted Answer

Topic 2: If common stockholders are the owners of the company, why do they have the last 
claim on assets and a residual claim on income? Were stockholders and bondholders treated 
differently during the recent auto industry bailouts?
Solution: 
Shareholders are considered to be the owners of the company and the actual owners of the 
company have the last claim to the funds that remain with the company. If the firm is profitable 
in that case, the owners can have the share after being paid off to the bondholders and creditors 
of the company. Thus it can be said that the residual claim of shareholder’s on the profits of the 
company can be considered as a privilege as well as potential drawback. Usually shareholders 
of the company have special voting rights and privileges that give the voting rights and other 
ownership privilege to the shareholders.

Topic 2: If common stockholders are the owners of the company, why do they have the last claim on assets and a residual claim on income? Were stockholders and bondholders treated differently during...

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