Which of the Following Statements Concerning Common Stock and the Investment

question 24

Multiple Choice

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

• A) The preemptive right gives each existing common stockholder the right to purchase his or her proportionate share of a new stock issue.
• B) If a firm sells 1,000,000 new shares of Class B stock, the transaction occurs in the primary market.
• C) 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.
• D) 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.

---

Definitions:

Variable Costing

An accounting method that only includes direct variable costs in product cost calculations, excluding fixed manufacturing overhead.

Absorption Costing

An accounting practice that includes every cost associated with manufacturing, like direct materials, direct labor, and variable as well as fixed overhead expenditures, in determining a product's cost.

Units Produced

A measure of the total number of complete units manufactured or completed in a given period.

Units Sold

The total quantity of products that a company has sold to its customers during a particular time frame.