BUS 420 Chapter Notes - Chapter 8: Risk Premium, Sinking Fund, Market Saturation
20 Jul 2020
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Common stockholders are the owners of a corporation, and have certain rights and privileges. Right to elect its directors who then elect the officers who manage the business. Preemptive right gives the current shareholders the right to purchase any new shares issued in proportion to their current holdings. The preemptive right enables current owners to maintain their proportionate share of ownership and control of the business. Not always included in all charters, only corporate charters. Prevents a transfer of wealth from current stockholders to new stockholders. Without this, corporations could issue new stock and buy it all itself, seizing control from the current stockholders. Classified stock sometimes created by a firm to meet special needs and circumstances. Generally, when special classifications of stock are used, one type is designated class a, another as class b, and so on. For example, class a might be entitled to receive dividends before dividends can be paid on class b stock.
