The Primary Reason for Creating Dual or Multiple Classes of Stock

question 61

Multiple Choice

The primary reason for creating dual or multiple classes of stock has to do with:

• A) Exchange listing requirements.
• B) Satisfying TSX bylaws.
• C) Freezing out minority shareholders.
• D) Paying for acquisitions.
• E) Control of the firm.

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Definitions:

Firm

A business organization, such as a corporation or partnership, that sells goods or services in exchange for revenue.

Profit-Maximizing Firm's Output

The output level at which a firm achieves the maximum possible profit, typically where marginal cost equals marginal revenue.

Perfectly Competitive Firm

A theoretical concept where a company operates in a market where there are many buyers and sellers, all selling homogeneous products, with no barriers to entry or exit.

Monopolist's Product

A product that has no close substitutes, making the seller the sole provider and able to control market prices.