Which of the Following Statements Is Correct

question 47

Multiple Choice

Which of the following statements is correct?

• A) One danger a family-owned business faces when it goes public is the loss of absolute voting control of the company,because there is no way to keep new stockholders from voting.
• B) The market is less active for small companies' shares,so these stocks must be included on the SEC's list in order to inform investors of their existence.Therefore,"listed shares" as the term is generally used refers to shares of smaller as opposed to larger companies.
• C) Before a company can offer a new issue of common stock to the public,it must get approval from the SEC for the price at which the stock can be sold.If the SEC thinks the proposed price is too high,then the company's prospectus is rejected and the stock cannot be sold.
• D) The preemptive right refers to stockholders' right to elect a company's board of directors.
• E) Each of the above statements is false.

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Definitions:

Variable Cost

A variable cost varies directly with the level of production or sales volume, such as materials and labor costs.

Operating Income

Earnings before interest and taxes (EBIT), a measure of a company's profitability from regular business operations.

Transfer Price

The price at which goods and services are sold between divisions within the same company or between a company and its subsidiary.

Variable Cost

Costs that fluctuate directly with changes in production or sales volume.