In which of the following circumstances is the investor most likely to exert significant influence over the operating and financial policies of the investee company?
A)The investor owns 48% of the investee's outstanding nonvoting preferred stock.
B)The investor owns 22% of the investee's outstanding common stock and one other investor owns the other 78%.
C)The investor owns 36% of the investee company's outstanding convertible bonds.
D)The investor owns 19% of the investee's outstanding common stock and has a seat on the investee's board of directors.

Question

Quizplus · Accepted Answer

Owning 19% of the outstanding common stock and having a seat on the board of directors would give the investor significant influence over the operating and financial policies of the investee company. While owning a large percentage of nonvoting preferred stock (A) or convertible bonds (C) may provide some influence, they do not typically come with voting rights or representation on the board of directors. Owning only 22% of the common stock and sharing ownership with another investor (B) would not provide significant influence compared to having representation on the board.

In Which of the Following Circumstances Is the Investor Most