A Disadvantage of a Private Placement as a Source of Additional

question 53

Multiple Choice

A disadvantage of a private placement as a source of additional equity is:

• A)it is slow relative to a rights issue
• B)it dilutes the proportionate claims of existing shareholders
• C)the price per share is usually less than the subscription price in a rights issue
• D)the placement can be made to an investor who supports the current management
• E)tt is more expensive than a rights issue.

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Definitions:

Inventory Turnover

A measure of how many times a company's inventory is sold and replaced over a period, indicating the efficiency of the company in managing and selling its stock.

Quick Ratio

A liquidity ratio that measures a company's ability to meet its short-term obligations with its most liquid assets, excluding inventory.

Acid-Test Ratio

A financial metric used to evaluate a company's short-term liquidity position by dividing its most liquid assets by its current liabilities.

Current Ratio

A financial metric indicating a firm's capacity to fulfill its short-term debts, which are obligations due within the next year, by dividing its current assets by its current liabilities.