Under a ______________, If Any Additional Shares of Common Stock

question 45

Multiple Choice

Under a ______________, if any additional shares of common stock, or any security that may be converted into common stock, are to be issued, the securities must be offered for sale first to the existing common stockholders.

• A) red herring
• B) rights offering
• C) seasoned offering
• D) shelf registration

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Definitions:

Capital Structure

refers to the mix of debt and equity financing that a company uses to fund its operations and growth.

Financial Leverage

Utilizing borrowed money to amplify the potential gains from an investment, but also elevating the risk of incurring losses.

DFL

Degree of Financial Leverage; a ratio that measures the sensitivity of a company's earnings per share to fluctuations in its operating income, based on its capital structure.

EBIT

EBIT stands for Earnings Before Interest and Taxes, a measure of a firm’s profitability that excludes interest and income tax expenses.