One Motive for Issuing Classified Stock with Different Voting Rights

question 126

Multiple Choice

One motive for issuing classified stock with different voting rights is to

• A) increase the market value of the company.
• B) avoid SEC reporting requirements.
• C) allow the company's founders to retain control of the company.
• D) facilitate the issue of additional shares in the future.

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Definitions:

New Equilibrium

The state reached when market forces realign, resulting in a new balance between supply and demand after a disturbance.

Total Surplus

The aggregate net benefit to society derived from the production and consumption of a good or service, comprising both consumer and producer surplus.

Equilibrium Price

The market price at which the quantity of goods supplied is equal to the quantity of goods demanded, achieving a state of market balance.

Consumer Surplus

The division between the total financial commitment consumers are willing to make for a product or service and the amount they actually contribute.