A Firm's Founder Sells Equity to Outside Investors for the First

question 80

Multiple Choice

A firm's founder sells equity to outside investors for the first time in the form of preferred stock. In what way is this preferred stock most likely to differ from the preferred stock issued by an established public firm?

• A) It will have a larger dividend.
• B) It will most likely not pay cash dividends.
• C) It will give the holder seniority in any liquidation of the company.
• D) It cannot be converted into common stock.

---

Definitions:

Union Grievance

A formal complaint filed by an employee or union against an employer, claiming violation of a collective bargaining agreement.

Arbitration

A form of dispute resolution where an impartial third party, the arbitrator, makes a decision on a dispute outside the court system.

Arbitrator

A neutral third party who resolves disputes between two other parties, making decisions that are usually binding.

Unionization

The process of organizing the employees of a company into a labor union to negotiate wages, working conditions, and other employment terms.