One common reason for issuing two distinct classes of common stock is to:
A) sell different classes to increase profits.
B) allow one stock to increase in price while the other class declines.
C) restrict voting privileges from some shareholders.
D) conserve cash by offering dividends to only one class of stockholders.

Question

Quizplus · Accepted Answer

Issuing two classes of common stock allows the company to restrict voting privileges from some shareholders. For example, one class of stock may have full voting rights while the other class has limited voting rights, such as no ability to vote on the election of directors. This can be advantageous for the company to maintain control over certain decisions while still raising capital through the issuance of stock.

One Common Reason for Issuing Two Distinct Classes of Common