Question

Identify the general rights (cash flow right and control right) that are commonly granted to common stock shareholders, preferred stock shareholders, and bondholders

Answer 1

Common stock holders have voting rights , but they have the least right over the cash flows of the company. The owners of equity are generally the owners of the company. The equity holders have maximum control rights.

Preferred stock holders have no right to vote but they have the right to be paid dividends before any dividends is paid to the common stock holders.

The bond holders have the least control over a company but they are the first ones to claim the cash flows generated by a firm. Cash flows have to be distributed to the bond holders first before cash is distributed to any one.In the event of liquidation, the bondholders receive cash flow first, before by distribution is made to common or preferred stock holders.The bond holders have the least right to control.