XYZ Inc Owns 55% of DEF Inc

question 47

Multiple Choice

XYZ Inc. owns 55% of DEF Inc.'s 100,000 outstanding voting shares. Another company, GHI Inc., owns 40%, with the remaining shares being held by many individual investors. GHI Inc. also owns $25,000,000 worth of DEF Inc.'s $1,000 par value bonds, each of which is convertible to one voting share of DEF Inc. Which of the following statements regarding the control of DEF Inc. is correct?

• A) XYZ Inc. has control over DEF Inc. as it owns a majority of the latter's currently outstanding voting shares.
• B) XYZ Inc. does not have control over DEF Inc., as it cannot exercise control over DEF's strategic operating, investing and Financing activities without the cooperation of GHI Inc.
• C) XYZ Inc. has de facto control over DEF Inc.
• D)As long as GHI Inc. does not exercise its option to convert its bonds to voting shares, XYZ Inc. has control over DEF Inc.

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Definitions:

Unweathered Lava

Refers to lava that has been recently erupted and has not been altered by weathering processes.

Ash Blanketing

Ash blanketing refers to the deposition of volcanic ash over the surface during a volcanic eruption, which can cover areas in a dense layer of ash impacting environments and human activities.

Scoria Cone

A small, steep-sided volcanic cone built of loose, fragmented cinder-like material, typically basaltic in composition.

Composite

In geology, composite refers to rocks or materials made up of various distinct components or layers, often seen in volcanic activity.