The Disadvantage of a Rights Offering Is

question 87

Multiple Choice

The disadvantage of a rights offering is:

• A) current shareholders are protected against dilution.
• B) the firm has a built-in market of knowledgeable investors.
• C) distribution costs are lower than a public offering.
• D) shareholders who do not exercise or sell rights will have their ownership diluted.

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Definitions:

Realized Gain

The profit made from the sale of an asset or investment when it is actually sold, not just on paper.

Available-for-sale Securities

Financial assets that are intended to be sold before they reach maturity or are needed to fund specific obligations.

Interest Revenue

Income earned on investments, loans, and other interest-bearing financial instruments, recorded as revenue in the income statement.

Debt Trading Securities

Financial instruments that involve debt and are actively bought and sold on markets with the aim to profit from price movements.