The Preemptive Right Is Designed to

question 6

Multiple Choice

The preemptive right is designed to

• A)allow management to diffuse stock ownership any voting power.
• B)allow managers to preempt a stock offering if they do not like the terms of the deal.
• C)allow existing shareholders the right to sell their existing shares before the new offer.
• D)allow existing shareholders to buy shares of the new offering if they desire.
• E)None of these choices are correct.

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Definitions:

Net Income

The amount of revenue left over after deducting all expenses, taxes, and costs from total revenue.

Cost of Goods Sold

The direct costs attributable to the production of goods sold by a company, including materials and labor.

Contra-Asset

An account on a company's balance sheet that reduces the value of an asset, often used for accumulated depreciation.

Current Asset

Any asset that is expected to be converted into cash within one year or within the normal operating cycle of a business.