I have these four set of questions, and I don\'t know how to answer them since I
ID: 2594763 • Letter: I
Question
I have these four set of questions, and I don't know how to answer them since I don't know the formulas and stuffs - Can you please explain them in a simple way, it doesn't have to be explained briefly, just need a short a simple answer for these questions
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Question 1:
Differentiate between straight and cumulative voting rights
Question 2:
Describe the basic charactistics of common and preferred stock, and corporate bonds
Question 3:
Identify the rights of shareholders and bondholders
Question 4
How would the following characteristics impact the yield on a bond:
- Secured debt versus a debenture
- Subordinated debenture versus senior debt
- A bond with a sinking fund versus one without
- A callable bond versus a non-callable bond
Explanation / Answer
Cumulative or straight. Cumulative voting refers to the fact that a shareholder has votes that are equal to the number of shares multiplied by the number of positions the shareholders are voting for. Meanwhile, straight voting refers to the fact that a shareholder may only cast one vote per share that the shareholder has.
To demonstrate this distinction, take for example the following hypothetical: There are 1,000 outstanding shares. You have 300 shares, and there are five open seats. In a straight voting system, you can only vote 300 times per open seat, and therefore you cannot ensure that a single director you want on the board will be guaranteed a seat. In a cumulative voting system, you have 1,500 shares to vote whichever way you wish. You can divvy these up among the five open seats, and can give three candidates 500 votes each, or just one mere vote short of being given a position. At this point, you are almost guaranteed you can vote in three candidates of your choosing.
Cumulative voting allows minority shareholders to have a say in the board of director meetings. This is because a minority shareholder, as demonstrated above, may be able to put all of their votes on one person and the majority shareholder cannot divide up their votes in a way to elect all of their directors.
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