When a corporation has only one class of stock. the stock is called:

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When a corporation has only one class of stock, the stock is
called: Preferred stock. Par value stock. Common stock. Stated
value stock. No-par value stock.

Answer

General guidance

Concepts and reason
Stockholders’ equity:

The shareholders’ equity section of balance sheet presents the amount of the total stockholders’ equity when the balance sheet is prepared. In the stockholders’ equity section of the balance sheet the total stockholders’ equity is computed by adding the capital stock, additional paid in capital and retained earnings.

Fundamentals

Common shares refer to the shares which constitute ownership in a company. The common shareholders are treated as the owners of the company. The voting rights are provided to the common shareholders.

Preferred stock refers to the shares on which a fixed rate of dividend is given by the company to the preferred shareholders. Preferred dividends are paid to preferred shareholders in preference to the common shareholders.

Step-by-step

Step 1 of 2

The common stock is the stock when there is only one class of stock in a corporation. The preferred stock will not be there when the corporation is having one class of stock. So, this option is incorrect.

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When a corporation is having one class of stock, then such stock is the common stock. It is not necessary that such stock is par value stock. So, this option is incorrect.

The common stock is the stock when a corporation has one class of stock. The stated value stock will not be there when the corporation is having one class of stock. So, this option is incorrect.

When a corporation is having one class of stock, then such stock is the common stock. It is not necessary that such stock is no par value stock. So, this option is incorrect.

Preferred stock refers to the stock in which the stockholders have no voting rights. The stockholders are not considered as the owners of the company. So, if the company is having only one class of stock, then preferred stock will not be that stock.

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The par value stock refers to the amount which will be mentioned in the stock certificates. So, when a corporation has one class of stock, then it is not necessary that such stock is par value stock.

The stated value stock refers to the amount per stock which is used by the company for the internal accounting. So, when a corporation has one class of stock, then it is not necessary that such stock is stated value stock.

The no par value stock refers to the stock which a company issues in which the face value of the stock is not mentioned in the stock certificates. So, when a corporation has one class of stock, then it is not necessary that such stock is no par value stock.

[Hint for the next step]

Use the information to determine the correct option.

Step 2 of 2

When a corporation has only one class of stock, the stock is called common stock.

The common stockholders are the stockholders who are considered as owners of the company. The common stockholders of the company are given some rights. The common stockholders of the company have the right to vote. So, when there is only one class of stock in a company, then such stock is common stock.

Answer

When a corporation has only one class of stock, the stock is called common stock.


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