LO1e

Question 1

Rights of owning commin stock

Answer 1

Right to vote for corp directors
Right to use a proxy (absentee ballot)
Stock can be sold or gifted because it is freely transferable without permission of corporation

Question 2

Depending on company bylaws and state laws a stockholder can have a:

Answer 2

Statutory voting- cast one vote per share

Cumulative voting - allow stockholder to allocate their total shares in any manor they chose

Question 3

Addition benefits of owning common stock

Answer 3

Growth (capital gains) - retun in excess of inflation
Income - from dividends
Limited liability - only can lose what put in

Question 4

Why add common stock to clients portfolio?

Answer 4

Potential capital appreciation
Income from dividends
Hedge against inflation

Question 5

Risks of owning common stock

Answer 5

Market Risk
Decreased or no dividend income
Low priority at dissolution(bancruptcy)

Question 6

Have the Right to - regarding common stock

Answer 6

Get limited access to the corps books
Examine meeting minutes od BOD
Examine list of stock holders
Receive audited set of financial statements of company performance each year
Preemptive rigbt to maaintain their proportionate share of ownership in the corp