3.1 Common Stock
Common equity provides potential for long-term capital appreciation and dividend growth, serving as an essential hedge against purchasing power risk.
Key NASAA Exam Takeaways
- Common stock represents residual ownership in a corporation.
- Statutory voting allocates one vote per share per board seat; Cumulative voting allows pooling votes for a single seat (benefits minority shareholders).
- Preemptive rights allow existing shareholders to maintain proportional ownership when new shares are issued.
- Common stockholders hold the lowest priority claim in corporate liquidation.
Knowledge Checkpoint • Section 3.1
A shareholder owns 100 shares of stock in a company where 3 board seats are up for election. Under cumulative voting, what is the maximum number of votes the shareholder can cast for a single candidate?