Question

In your own words, what does it mean that common stockholders have a residual claim on the assets of the corporation?

Answer 1

Common Stockholders have a residual claim on the assets of the corporation means that at the time of liquidation, bankruptcy or winding up of business by the corporation the payments owed to the secured creditors, bondholders, unsecured creditors. preference shareholders etc. are first paid then the residual portion, if any, is availabe for the common stock holders. Common Stockholders are residual claimants, who among a group of claimants would receive their claims only after claims of all other claimants have been taken care of.  

Common Stockholders are at the bottom of the priority ladder for laying a claim and can only be considered for having a right to the corporation's asset only after bondholders, debtholders and preferred shareholders claims are settled in full.