Question

Owner's claim on a property's Cash Flow is known as a "residual claim"; what does that mean?

Answer 1

Residual claim means owners get paid only after all the creditors and lenders are paid. Once the property is sold, the proceeds from the sale of the assets are used to pay the creditors, lenders, and the owners.

However, the preferrence is given to creditors and lenders. They have the first right to the cash flows from the sale of the property. After paying them, if there is still some cash left (residual), then the owners get paid. If there is no cash left after paying the creditors and lenders, then owners get nothing.

This is the meaning of "residual claim"