"Preemptive Rights" Means That

question 17

Multiple Choice

"Preemptive rights" means that

• A)existing shareholders can prevent management from issuing additional common stock.
• B)common shareholders can "preempt" preferred shareholders for dividends.
• C)existing shareholders are guaranteed an opportunity to retain their proportional share of ownership of the firm.
• D)management can preempt the right of shareholders to receive dividends if earnings are down.

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Definitions:

Extrinsic Reward

Rewards or incentives given for performing a task that come from an external source, such as money, prizes, or recognition.

Share Options

Financial derivatives that give the holder the right, but not the obligation, to buy or sell shares of a stock at a specified price within a specified time.

Promotion

Marketing activities aimed at increasing awareness, interest, and sales of a product or service.

Sales Margin

The difference between the sales revenue of a product and the cost of goods sold, expressed as a percentage of the sales revenue, indicating profitability.