Acct604 Managerial Accounting: Rights Of Assessment Answers

Answer:

Introduction

With the ramified changes in economy, every organization has been using the equity share capital as finance source to raise capital from the market. It is analyzed that equity shareholders are the owners of the company who invest their capital in the business for their business operation.

Right to the shareholders 

Shareholders are the owners of company and entitled to participate in the general meeting and vote. The most common right of the shareholders are sharing the company’s profitability, income and assets, degree of control and influence over the company, management selection, and pre-emptive right and voting rights in the meetings. The shareholders of the company are also entitled to know all the imperative information about the business transactions of the company. These investors are also entitled to get the annual report and financial statement of company which they use to take their imperative financial decisions. These shareholders are main investors and entitled for the return on equity shareholding capital invested by them and dividend payment. In addition to this, these shareholders are also entitled for the key business decisions which company is going to take for expanding business. For instance, if company wants to enter into the strategic alliance with other company then it will have to get resolution passed from the shareholders in the convinced meeting (Bruno, 2015). The shareholders also have right to influence the management through the election of the company’s board of the directors. In addition to this, the main right available to shareholders are the pre-emptive right. This right shows the right to buy issued shares before the public could buy (Camara, 2016).

Right to preferred stocks 

The preferred stock is the typical class of shareholders who have higher claim on its assets and earning than common stocks. These preference shareholders are entitled to have dividend before the dividend that must be paid out before the dividend to be paid to the common stakeholders (Bruno, 2015). They have pre-emptive right to the shareholders. These preferences shareholders are the first class shareholders and have special right towards the share capital of organization. These shareholders will be given dividend on priority basis before the dividend given to equity shareholders (Agyemang, Aboagye, & Frimpong, 2015). The preferred stockholders are the main shareholders who are classified different from those shareholders are and kept at higher point as compared to equity shareholders (Levis, Meoli, & Migliorati, 2014). 

Conclusion 

After analysing the rights of the preferences shareholders and equity shareholders, it could be inferred that preferences shareholders have right for the dividend to be paid to them before the same could be paid to equity shareholders. However, they could not participate in meeting and other programs. On the other hand, equity shareholders have right to participate in the meeting and vote for particular business decisions. They plays pivotal role in the business decision of organization.

References

Agyemang, O. S., Aboagye, E., & Frimpong, J. (2015). Left to their fate: rights of minority equity holders in Ghanaian firms. Society and Business Review, 10(1), 40-66.

Bruno, S. (2015). Legal Rules, Shareholders and Corporate Governance: The European Shareholder Rights’ Directive and Its Impact on Corporate Governance of Italian Listed Companies: Australia: The Telecom SPA Case.

Levis, M., Meoli, M., & Migliorati, K. (2014). The rise of UK Seasoned Equity Offerings (SEOs) fees during the financial crisis: The role of institutional shareholders and underwriters. Journal of Banking & Finance, 48 (1) 13-28.

Camara, A. (2016). Anonymous Capital: Managing Shareholder Volume for Equity Crowdfunded Companies in Canada. Banking & Finance Law Review, 31(2), 259.