Sara and Clara Form a Proprietary Company Called Slara Pty

question 9

Multiple Choice

Sara and Clara form a proprietary company called Slara Pty Ltd, to incorporate their small haberdashery business.Sara and Clara hold 51% of the shares and issue the remaining 49% to 30 different friends and acquaintances.Slara Pty Ltd is most likely to be classified as a reporting entity based on:

• A)Economic importance or significance
• B)Political importance or significance
• C)Financial characteristics
• D)Separation of management from economic interest

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Definitions:

Common Stockholders

Individuals or entities that own shares in a company's common stock, giving them voting rights and a potential share of the company's profits through dividends.

Preferred Stockholders

Investors who own shares of preferred stock, with claim to dividends and assets in the event of liquidation prior to common stockholders, often without voting rights.

Expected Rate

The anticipated return or yield on an investment or the forecasted growth rate of a variable such as inflation or economic growth.

Interest Rate

The cost of borrowing money or the return for investing money, typically expressed as a percentage of the principal.