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Why do stockholders have the last claim on assets and a residual claim on income?
Wiki User
∙ 12y ago
Because they are equity, NOT debt.
The company owes them nothing - they own the company.
They would have gotten to share in profits, debt holders wouldn't.
They run the company, vote on Board members and have a say on what it does. Debt does not. Debt is simply promised by the company to be repaid, at an agreed interest (and sometimes, like vendors whose bills simply weren't honored, not even with that).
The debts being discharged are the debts of the company...and without the protection of being a stockholder (which provides limited liability to the amount of their investment...say if they were in a partnership or unincorporated businesss), the debts would have been the personal liability of the owners. Not only would they get paid last....their personal assets, homes and such, would have been used to pay the debts of the business - that they owned.
Wiki User
∙ 12y ago
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Is bondholders have a priority claim on assets ahead of common stockholders and preferred stockholders?
preferred stakeholder
Has the lowest claim on the assets and cash flow of the firm?
Common shareholders have the lowest claim on the assets of assets of a firm. They have only a residual claim on the assets and are far below the preferred stock classification.
What is the difference between preferred and common stockholders?
Preferred stockholders have a greater claim on the assets and profits of a company compared to common stockholders. If a company is liquidated, preferred stockholders have to be paid first before the common stockholders.
How do you calculate owner's capital?
Answer:The owner's capital (or: equity) is the residual claim. It is calculated as assets minus liabilities.
Why does buying a corporate bond involve less risk than buying stock in the same corporation?
When a company faces near bankruptcy and needs to liquidate its assets, the first claim will be given to the creditors before the stockholders. The bond represents the debt of a company. Hence, it is the company's legal obligation to settle it. While the stockholders will just share the gains and as well as the losses of the company.
What is the definition of residual disability?
Basically it is a continuation of your prior disability claim.
How do you claim assets from a parent?
by court order
Can a credit card company go after the estate of someone whose only income is social security?
If the estate has any assets, they can certainly apply to get their money back. They can place a claim with the executor. The executor is responsible for clearing any debt before distributing assets.
What is a claim against assets?
Refund of money,debt,assets,or nay value at time of liqidation
A claim against a firm's assets by a creditor?
Networth
Who has the first claim to the profits or assets of a firm?
a - lenders
Who has the first claim to the profits and assets of a firm?
Creditors.
