Stock That Is Sold Through a Rights Issue

question 59

Multiple Choice

Stock that is sold through a rights issue:

• A) is offered for cash to the general investing public.
• B) will not affect the market price of the shares.
• C) is limited for sale to existing shareholders.
• D) must be sold on a firm commitment basis.

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Definitions:

Avoidable Cost

A cost that can be eliminated by choosing one alternative over another in a decision. This term is synonymous with differential cost and relevant cost.

Sunk Costs

These are costs that have already been incurred and cannot be recovered, thus should not affect future business decisions.

Future Costs

Costs that will be incurred in the future as a result of current decisions or plans.

Alternatives

Different options or strategies available to be chosen in decision-making processes.