Financial Risk Is Additional Risk Borne by Shareholders as the Firm

question 119

True/False

Financial risk is additional risk borne by shareholders as the firm issues more debt.

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Definitions:

Preemptive Right

A shareholder's right to buy additional shares of a company's stock before it is offered to the public, maintaining their proportional ownership.

Common Stock

Equity ownership in a corporation, giving holders voting rights and a share in the company's profits through dividends and capital appreciation.

Ownership

The state or fact of exclusive rights and control over property, which can be an object, land/real estate, or intellectual property.

Dividend Growth Model

A method for valuing a stock by using predicted dividends and discounting them back to present value.