Many Firms Disaggregate the Initial Amounts They Received from Shareholders

question 80

Multiple Choice

Many firms disaggregate the initial amounts they received from shareholders for common shares into the par or nominal or stated value of the shares and the amounts received in excess of this value, called:

• A)additional paid-in capital (APIC).
• B)share premium.
• C)capital contributed in excess of par value.
• D)Choices a, b, and c are correct.
• E)None of these answer choices is correct.

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Definitions:

Protective Covenant

Part of the indenture limiting certain transactions that can be taken during the term of the loan, usually to protect the lender’s interest.

Preemptive Right Provision

A clause in a contract that gives existing shareholders the right to buy new shares before the company offers them to the public, in order to maintain their fractional ownership.

Private Placements

The sale of securities directly to a limited number of private investors rather than through a public offering in the open market.

Term Loans

Loans from financial institutions that are provided with a set amount of money and a specified repayment schedule and maturity date.