Question 4. in the Nature of Equity module seems incorrect



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Question: Which if these statements is false?

There is a limit on how many shareholders a public limited company can have

There is a limit on how many shares a public limited company can issue. -

Shareholders are residual claimants. - Correct

Shareholders are personally liable.

Shareholders ARE residual claimants, why would this be a false statement as shown by the answer feed???

2 Answer(s)


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Shareholders are residual claimants, this is a false statement as an Initial Public Offer or an IPO is usually subscribed by the general public or Financial Institutions with the assistance of various market intermediaries. As an IPO is primarily for the public it would be incorrect to say that they are residual claimants.

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Shareholders are residual claimants is correct.

If a company files for bankruptcy then the shareholders are the last people who get any proceeds from asset sales.

The first priority goes to debt holders such as banks who will get their money first.

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