The Preemptive Right Is Important to Shareholders Because It

question 74

Multiple Choice

The preemptive right is important to shareholders because it

• A) allows managers to buy additional shares below the current market price.
• B) will result in higher dividends per share.
• C) is included in every corporate charter.
• D) protects the current shareholders against a dilution of their ownership interests.
• E) protects bondholders and thus enables the firm to issue debt with a relatively low interest rate.

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Definitions:

Natural Law Defense

A legal argument grounded in the belief that certain laws are inherent or universal and can serve as a justification or defense for actions in legal proceedings.

Judges

Officials appointed or elected to decide cases in a court of law, interpret legal statutes, and administer justice according to the law.

Interpreting Law

The process of determining the meaning and application of statutes, regulations, and legal precedents.

Ejusdem Generis

A legal principle stating that where specific words are followed by general ones, the general words are interpreted to include things of the same kind as the specific ones.