What is the difference between control rights and cash flow rights?

Question

Quizplus · Accepted Answer

Control rights refer to the ability to make decisions that affect the company, such as appointing directors or approving mergers, while cash flow rights refer to the right to receive a portion of the company's profits. In some cases, large investors may use their control rights to derive private benefits, meaning they benefit disproportionately compared to their cash flow rights. Therefore, control rights can exceed cash flow rights. Option A is incorrect because control rights and cash flow rights are not always the same thing. Option C is incorrect because while generating cash is a key goal of investing, investors may also consider other factors such as potential for growth or strategic reasons for investing. Option D is incorrect because B is the correct answer.

What Is the Difference Between Control Rights and Cash Flow