Question

Accounting about Stockholders' Equity? 1. Common stockholders usually have all of the following rights except: a) To receive dividends when declared. b) To share in the distribution of assets. c) To elect board of directors. d) To participate in the day-to-day operations. 2. Which of the following is a reason that a corporation would prefer to issue stock instead of bonds? a) Dividend payments can be deducted for income tax purposes but interest payments cannot. b) Expansion is accomplished without surrendering ownership control. c) The risk of going bankrupt is less. d) All of the above are reasons for issuing stock. 3. Which of the following financing alternatives has the highest preference of payment in a case where the company liquidates its assets? a) Common Stock. b) Preferred Stock. c) Bonds. d) They have equal preference. Please help me. Thank you for your help.

Answer 1

1. D. to participate in the day-to-day operations.
Let's say that you buy a stock for microsoft, it doesn't make you able to come to their offices and help them handling the customers.

2. C. the risk of bankrupt is less
when you sell your company's stock to other buyers, that buyers will also take the risk from all your company's activity because technically they own a part of your company, which make the risk of going bankrupt is less, but you surrender a part of ownership of your company

3. B. Preferred Stock

Where a company liquidates its assets, they will distribute the payment to all the holders of preferred stock first.

If there's any leftover after the company distribute the payment to preferred stock holders, than that leftover is distributed to the common stock holders

Hope this helped you out