How Is the Value of a Right on a New

question 31

Multiple Choice

How is the value of a right on a new share calculated during a rights issue?

• A) Actual market value of share ex- rights - actual market value
• B) Theoretical market value of share ex- rights - subscription price
• C) Theoretical market value of share ex- rights - actual market value
• D) Actual market value of share ex- rights - subscription price

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Definitions:

FOB Shipping Point

A term used in shipping contracts to indicate that the buyer is responsible for the goods and shipping costs from the point of origin.

Perpetual Inventory System

An inventory tracking system that records the sale or purchase of inventory immediately through the use of computerized point-of-sale systems and enterprise asset management software.

Debit Memo

A document issued to record a reduction in the balance due from a customer, often due to a return or correction.

Gross Profit

The difference between revenue and the cost of goods sold before expenses.