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b. An entitlement to dividends
As the company owner, shareholders have the right to receive some
portions of company profits. However, there is certain amount of profits
that held as company retained earnings.
c. Preemptive right
Preemptive right is the right to gain the same percentage of ownership
as if company issues additional number of shares. If there will be more
outstanding shares and as a result, the ratio of previous stocks’ ownership
will be decreased. Thus, preemptive right provides priority for the ‘old’
shareholders to purchase new additional shares so that the percentage of
ownership remains constant. Besides that, shareholders have the right to
sell their shares and decide which assets r emain after companies
liquidated.
2) Preferred stocks
Preferred stocks are a combination between bonds and common shares.
It is responsible for paying the interests of borrowing, and provides the
fixed yield in form of preferred dividends, just like bonds. In the case of
liquidation, claim of preferred shareholders is placed under the claim of
bond holders.
Preferred stocks have special rights in comparison with the common
stocks. Those rights include the right of fixed dividend and priority right
of receiving payment in case of companies’ liquidation.
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