When a Company Founder Sells Stock to Outside Investors in Order

question 67

True/False

When a company founder sells stock to outside investors in order to raise capital, the share of the company owned by the founder and the founder's control over the company will be reduced.

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Definitions:

Perpetuity

A financial concept representing a series of equal payments that continue indefinitely.

Outstanding Stock

The shares of a company that have been issued and are currently held by investors, including both public and private shareholders.

Effective Control

The practical authority to direct and manage operations, assets, or investments, often regardless of ownership percentages, ensuring the achievement of strategic objectives.

Widely Held Company

A corporation whose ownership is distributed over a large number of people with no single individual or group having a significant proportion.