Which of the Following Is TRUE of Par Value of a Common

question 122

Multiple Choice

Which of the following is TRUE of par value of a common stock?

• A)It is determined on the basis of the stock's market value.
• B)It is an arbitrary value established for legal purposes in a firm's corporate charter.
• C)It indicates the market value at which the stock was originally sold.
• D)It allows stockholders to purchase additional shares at a price below the market price.

---

Definitions:

Price Mechanism

The method through which changes in supply and demand cause prices to increase or decrease, directing how resources are distributed in a market-based economy.

Market Failure

An instance where goods and services are distributed by an unregulated market in a manner that is not optimum, frequently causing a reduction in the total wellbeing of society.

Public Sector

The part of an economy that is controlled by the government, including public services and enterprises.

Capitalist Societies

Social systems that rely on private ownership of the means of production and operate on profit and market competition.