If a Corporate Charter Includes a Provision for Preemptive Rights

question 97

Multiple Choice

If a corporate charter includes a provision for preemptive rights, the stockholders

• A)must sell their stock to the company.
• B)get first option to buy additional issues of common stock.
• C)may purchase existing treasury stock.
• D)cannot utilize cumulative voting procedures.

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Definitions:

Shares Outstanding

The total number of a company's shares of stock that are owned by shareholders, including both public investors and company insiders.

Retained Earnings

The portion of a company's profits not distributed to shareholders as dividends but retained for reinvestment or debt payment.

Cash Assets

Resources in the form of currency or other items that can be easily converted to cash.

Cost Method

An investment accounting method where the investment is recorded at its acquisition cost, and income is recognized only when dividends are received.