Question

True or False: To segment the rights to which certain common shareholders are entitled, companies often separate common equity into more than one class of shares called classified stock.

Answer 1

Answer:

The correct answer is True.

Explanation:

Classified shares is a title issued by a company that represents the value of one of the equal fractions into which its share capital is divided. As an investment, it involves an investment in equities, since it does not have a fixed return established by contract, but depends on the good performance of the company.

Answer 2

Answer: True

Explanation: Classified stock is a type of common stock of a publicly traded company (a type of security that represents ownership in a company) that has special privileges, such as enhanced voting rights or dividend rights. In other words, voting privileges (number of votes or lack of votes, as the case may be) are the main reason for the creation different stock classes (usually denoted by Class A stock and Class B stock), not excluding dividend rights and liquidation preference.

Therefore, to segment the rights to which certain common shareholders are entitled, common equity is separated into more than one class of shares called classified stock.