One Common Reason for Issuing Two Distinct Classes of Common

question 97

Multiple Choice

One common reason for issuing two distinct classes of common stock is to:

• A) sell different classes to increase profits.
• B) allow one stock to increase in price while the other class declines.
• C) restrict voting privileges from some shareholders.
• D) conserve cash by offering dividends to only one class of stockholders.

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Definitions:

Capital Deficiency

A situation where a company's liabilities exceed its assets, indicating financial distress or bankruptcy risk.

Personal Debt

The total amount of money an individual owes to lenders, including loans, credit card debt, and mortgages.

Cash Distribution

The payment of earnings, or other financial assets, to shareholders or partners in a company or fund.

Income-Sharing Ratio

The predetermined agreement on how profits or losses will be distributed among partners or stakeholders in a business arrangement.