Companies can issue different classes of common stock. Which of the following statements concerning stock classes is CORRECT?
A) all common stocks, regardless of class, must have the same voting rights.
B) all firms have several classes of common stock.
C) all common stock, regardless of class, must pay the same dividend.
D) some class or classes of common stock are entitled to more votes per share than other classes.
E) all common stocks fall into one of three classes: a, b, and c.

Question

Quizplus · Accepted Answer

Companies can issue different classes of common stock and some class or classes of common stock are entitled to more votes per share than other classes. This is known as a dual-class structure and it is commonly used by tech firms, where the founders or top executives hold a class of shares with greater voting power, allowing them to maintain control over the company even if they own a relatively small portion of the equity. The other statements are incorrect: A) different classes of common stock can have different voting rights, B) not all firms have several classes of common stock, C) different classes of common stock can have different dividend rates, and E) there is no universal classification system for common stock.

Companies Can Issue Different Classes of Common Stock