When Setting the Price of a New Share Issue, a Corporation

question 123

Multiple Choice

When setting the price of a new share issue, a corporation does not need to consider

• A)future net income.
• B)expected dividend rate.
• C)current financial position.
• D)future trading on the secondary market.

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Definitions:

Sales Allowance

A reduction in the sale price granted by the seller to the buyer, often due to minor defects or because the buyer has returned part of the order.

Sales Returns

Transactions where customers return previously purchased merchandise for a refund, replacement, or credit toward future purchases.

Credit Sales

Sales made on credit, where the payment is received after the delivery of the goods or services.

Contra-Revenue

An account that offsets revenue accounts on the income statement, typically related to returns, allowances, and discounts.