The Disadvantage of a Rights Offering Is

question 87

Multiple Choice

The disadvantage of a rights offering is:

• A) current shareholders are protected against dilution.
• B) the firm has a built-in market of knowledgeable investors.
• C) distribution costs are lower than a public offering.
• D) shareholders who do not exercise or sell rights will have their ownership diluted.

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Definitions:

Step-down Method

An accounting method used for allocating indirect costs to different departments based on a hierarchy where the first allocation base is the costliest department.

Personnel Department

The division of a business that is focused on activities relating to employees, such as hiring, training, and benefits administration.

Number Of Employees

The total count of individuals employed by a business or organization at a specific point in time.

Step-down Method

A method used in accounting to allocate service department costs to production departments in stages.