The Preemptive Right Is Important to Shareholders Because It

question 78

Multiple Choice

The preemptive right is important to shareholders because it

• A) Allows management to sell additional shares below the current market price.
• B) Protects the current shareholders against dilution of ownership interests.
• C) Is included in every corporate charter.
• D) Will result in higher dividends per share.
• E) The preemptive right is not important to shareholders.

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Definitions:

Adjusting Entries

Accounting records created at the close of a fiscal period to distribute revenues and expenses to the timeframe they genuinely transpired.

Reversed

In accounting, referring to the action of negating a previous transaction or entry to correct or adjust financial records.

Accrual Basis

An accounting method where income and expenses are recorded when they are earned or incurred, regardless of when the cash transactions occur.

Insurance Expense

The cost incurred by a business for its insurance policies, which is recorded as an expense on the income statement.