Explore BrainMass

Explore BrainMass

    Explain the term residual claim to income for shareholders

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Please explain what is meant by the term "residual claim to income", as applied to common stockholders.

    © BrainMass Inc. brainmass.com March 4, 2021, 10:04 pm ad1c9bdddf

    Solution Preview

    The term 'residual' in any context refers to that which is leftover, and it certainly applies to the position of common stockholders when it comes time for distributions.

    Common stockholders are entitled to residual income or residual net assets after all the secured and priority claims are paid. There are two situations where common stockholders might be entitled to a residual:

    First, in bankruptcy, common stockholders are at the bottom of the heap in the ordering of distributions. Each state has laws about ...

    Solution Summary

    The 321 word solution explains the concept of residual claim to income in two distinct situations within the corporate world. Both include adequate explanations to demonstrate the effect to common shareholders of a corporation.