Often, a fiRm Creates a Second Class of Stock That

question 297

Multiple Choice

Often, a firm creates a second class of stock that has ___________ as compared with the first class.

• A) A lower priority in liquidation.
• B) The right to cumulative dividends.
• C) Unequal voting rights.
• D) A preemptive right.
• E) Cumulative voting power.

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Definitions:

Limited Liability

A legal structure that limits the personal financial risk of the business owners, protecting their personal assets from the debts and liabilities of the business.

Sole Proprietorship

A business owned and operated by a single individual, with no distinction between the business and the owner.

Closely Held Corporation

A type of company that is owned by a small group of people who are usually closely associated with the business.

Publicly Trades

Pertains to companies whose shares are bought and sold on stock exchanges, allowing investors to purchase ownership interests in the businesses.