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Question 1
What is the primary voting right held by common stockholders?
Answer: Common stockholders have the right to vote on major corporate matters such as electing the board of directors, approving mergers, and authorizing additional shares.
Question 2
Under statutory voting, how many votes may a shareholder cast for each open board seat?
Answer: Under statutory voting, a shareholder may cast one vote per share owned for each open board seat, meaning votes cannot be concentrated on a single candidate.
Question 3
Under cumulative voting, how are a shareholder's total votes calculated, and what is the key advantage?
Answer: Total votes equal shares owned multiplied by the number of open board seats. The advantage is that shareholders can concentrate all votes on one candidate, giving minority shareholders a better chance of board representation.
Question 4
What is a preemptive right, and what does it protect common stockholders from?
Answer: A preemptive right gives existing common stockholders the opportunity to purchase newly issued shares before the public, protecting them from dilution of their ownership percentage.
Question 5
In a corporate liquidation, in what order are common stockholders paid relative to other claimants?
Answer: Common stockholders are last in liquidation priority, paid only after secured creditors, unsecured creditors, and preferred stockholders have been satisfied.