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The term residual claim refers to a stockholders’ right to share in assets upon liquidation. acquire...

The term residual claim refers to a stockholders’ right to

share in assets upon liquidation.
acquire additional shares when offered.
elect a board of directors.
receive dividends
The term residual claim refers to a stockholders’ right to

share in assets upon liquidation.
acquire additional shares when offered.
elect a board of directors.
receive dividends
business   accounting   
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Ans - SHARE IN ASSETS UPON LIQUIDATION
The liability side of balance sheet comprises of Shareholder's fund and Outside liabilities. Both are sources of raising capital. The difference is that debt holders do not have any voting rights like shareholders as they are creditors of company and not owners. So irrespective of whether there is profit or loss, Interest is to be paid to debt holders but that is all they will get and nothing more especially when it comes to cases when company is earning huge profits. Shareholders on the other hand have the right to share the profits of the company. In liquidation when all company's assets are sold off than first and foremost debts and other liabilities will be paid off and whatever is left upon liquidation will be shared by Stockholders. This is called RESIDUAL CLAIM.

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