Dim CoIssues Common Stock of $15,000

question 2

Multiple Choice

Dim Co.issues common stock of $15,000.Which of the following statements regarding the effect of this transaction on the company's liquidity and profitability metric is true?​

• A) ​The transaction increases the liquidity and decreases the profitability of the company.
• B) ​The transaction decreases the liquidity and increases the profitability of the company.
• C) ​The transaction increases the liquidity and has no effect on the profitability of the company.
• D) ​The transaction has no effect on the liquidity and increases the profitability of the company.

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Definitions:

Acquisition Business Combination

An acquisition business combination is a transaction or event where one entity gains control over another, often involving the purchase of the target company's stock or assets.

Fair Value

The estimated market value of an asset or liability, reflecting the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Common Stock

A form of corporate equity ownership, a type of security representing ownership in a corporation and gives rights to dividends and voting in company matters.

Acquisition

The process of obtaining control of another company or business entity through purchase or merger.