Which Statement Is Correct

question 7

Multiple Choice

Which statement is correct?

• A)The financial market generally reacts the same to a new issue of equity as it does to a new issue of debt as long as the issuer is the same.
• B)Issuing new equity shares is always viewed by the market as a positive event.
• C)Informed managers tend to issue new securities when the existing securities are underpriced.
• D)A decline in the price of existing stock when a new issue is released is a direct cost of selling securities.
• E)A firm's existing shareholders would prefer that new securities be issued when those securities are overpriced rather than underpriced.

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Definitions:

Income Summary

An account in the ledger that aggregates all the revenues and expenses for the period, used to transfer net income or loss to owner's equity.

Merchandise Inventory

Goods a company holds for the purpose of sale to customers.

Unearned Rent

Unearned Rent is a liability representing rent payments received in advance for which the services have yet to be rendered or the occupancy period has not yet occurred.

Rental Income

Revenue received from leasing property or other assets to tenants.