Question

Mark all that apply, each question may have more than one answer.

1. Common stock holders are designated certain legal rights and privileges, which of the following is not one of these rights.

a. A common stockholder has the right to elect the directors. A shareholders influence is proportional to the shareholders ownership of the firm.

b. Individual stock holders have a right to determine how much of their share of earnings they will receive.

c. A common shareholder can purchase a pro rata basis of any additional shares sold by the firm.

d. Common stockholders have a proportional right to any earnings paid as dividends.

2. How is an economic asset such as a stock, bond or firm valued?

a. Identify the size, timing, and risk of future cashflows available to the owner and discount these to the present.

b. Add up the book value of all the assets on the balance sheet.

c. Add up the book value of all of the assets on the balance sheet and subtract he sum of the liabilities.

d. Add up all cash flows that an owner will receive.

Answer 1

1.

The right not enjoyed by shareholders is-

b. Individual stock holders have a right to determine how much of their share of earnings they will receive.

How much dividend will be paid in a year is decided by the board of directors of the company not the shareholders.

All other options are correct.

Option a - Board of directors are chosen among the shareholders. And the equity shareholders has a right to vote proportionate to his shareholding in the company to decide the board of director.

Option c - The common shareholder has a right to purchase the shares if the company makes a fresh issue. It is first offered to existing shareholders than to outside investors.

Option d -  Common stockholders have a proportional right to any earnings paid as dividends. He has a right to share the earnings of the company in form of dividend.

Hope it helps!