Chapter 10, Problem 1DQ

What are the four baste rights of stockholders?

To determine

Determine the four basic rights of stockholders.

Explanation of Solution

Stockholder:

Stockholder is the person who holds stock in business incorporation and in return receives dividend. The share certificate is issued in the name of the stockholder.

Following are the four basic rights of stockholders:

1. 1) Dividends: The shareholders have the right to share the profit of the business in the form of dividends and the stockholders receive dividend for each share owned them.
2. 2) Vote: The shareholders may exercise their voting rights for the purpose of corporate matters like issuing of securities, making changes in corporate decisions, composition of the board of directors.
3. 3) Pre-emption: Stockholders have the right of maintaining their proportionate ownership in the corporation. For example, if the stockholder has 10 % of ownership and the corporation issued 250,000 of new shares. Then the stockholder must be given opportunity of buying 25,000$\left(\text{10\%of}\text{250,000shares}\right)$ shares from the newly issued shares.
4. 4) Right to receive proportionate share on the assets during liquidation: The stockholders have the right for receiving the assets that are remaining after paying the debt obligations of the corporation at the time of liquidation.