The right of stockholders of firm that new shares must be offered to existing stockholders first, rather than new stock holders is classified as ____________?
Correct answer: B. preemptive rights
- A. non-offered rights
- B. preemptive rights
- C. existing rights
- D. securitize rights
Explanation
Preemptive rights allow existing shareholders to purchase newly issued shares before they are offered to outsiders. This protects their proportional ownership and voting control from dilution.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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