What Is the Primary Reason Why Securities Are Sometimes Offered

question 65

Multiple Choice

What is the primary reason why securities are sometimes offered through a rights offering?

• A)To avoid corporate taxation of excessive profits
• B)To provide additional income to the current shareholders
• C)To assist current shareholders maintain their current proportional ownership position
• D)To replace a regular stock dividend
• E)To allow shareholders to avoid taxes

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Definitions:

Subscription Contract

An agreement between a provider and a customer for the provision of services or delivery of goods over a specified period in return for payment.

Shares Issued

The total number of a company's shares that have been sold to and held by shareholders.

Par Common Stock

Common stock with a nominal or face value assigned to it, often used in accounting to determine legal capital.

Carrying Value

The book value of assets and liabilities as reported in the financial statements.