Shareholders
A mutual shareholder or stockholder is an individual or company (including a corporation) that legally owns one or more shares of stock in a joint stock company. A company’s shareholders collectively own that company. Thus, the typical goal of such companies is to enhance shareholder value
Shareholders Are Actually Second Class - Explanation of Absolute Priority
By Austin Norman
The absolute priority rule applies when companies must pay their creditors first over their stockholders in case the company ever has to liquidate itself from bankruptcy. This means that stockholders have a grave disadvantage with companies that have to liquidate themselves to pay off debt. However certain types of debt get paid first such as senior debt which is issued from senior notes and has priority over unsecured debt in corporate finance. Lastly there is Subordinated debt which is the last thing companies are required to pay but STILL has priority over the shareholders. As you can see when you buy shares in a company you are the LAST priority if the company you are buying goes broke even though you are part owner. We are shareholders though, and we are the only ones that actually OWN the company and therefore as long as loans and taxes are paid we are entitled to ALL profits beyond that. So if we know the companies have the least chance of going broke, we will never have to worry about losing any profit in the companies we own in the long run.
Photo: ombwatch.org
One of the most important things too look is the quick and current ratios of a company. They should be above 2 at least if you want to be safe in your investments. The higher the current and quick ratios are the easier it will be for the company to PAY on debt especially immediate debt. You must also understand that company efficiency is important so you must analyze how well employees are being used. If you take the income of a company and divide it by the number of employees you can see how much on average an employee is generating for your company. Companies that are more efficient with a less chance of going broke by paying their creditors is a company that has efficient employees and management compared to their competition. We are seeing this with car companies now because if car companies can’t make good use out of their employees, or they cost too much, then they run the risk of going broke and leaving you the stockholder behind.
