Which of the Following Statements Concerning Common Stock and the Investment

question 6

Multiple Choice

Which of the following statements concerning common stock and the investment banking process is NOT CORRECT?

• A) If a firm sells 1,000,000 new shares of Class B stock, the transaction occurs in the primary market.
• B) Listing a large firm's stock is often considered to be beneficial to stockholders because the increases in liquidity and reputation probably outweigh the additional costs to the firm.
• C) Stockholders have the right to elect the firm's directors, who in turn select the officers who manage the business.If stockholders are dissatisfied with management's performance, an outside group may ask the stockholders to vote for it in an effort to take control of the business.This action is called a tender offer.
• D) The announcement of a large issue of new stock could cause the stock price to fall.This loss is called "market pressure," and it is treated as a flotation cost because it is a cost to stockholders that is associated with the new issue.
• E) The preemptive right gives each existing common stockholder the right to purchase his or her proportionate share of a new stock issue.

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Definitions:

Incorporate Transition

The process of smoothly integrating changes or developments into existing structures or systems.

Pronoun

A word used in place of a noun or noun phrase to avoid repetition and to refer to individuals without naming them.

Downplay

To make something appear less important or less significant than it actually is.

Contrasting Ideas

The presentation of thoughts or concepts that are opposite or very different from each other to highlight their differences.