When a corporation issues additional stock,current shareholders will be able to purchase new shares in proportion to their current ownership because of the

Question

Quizplus · Accepted Answer

The correct term for the shareholders' ability to purchase new shares in proportion to their current ownership is preemptive right. This right allows existing shareholders to maintain their relative ownership percentage and prevent dilution of their investment. Liquidation right refers to the right to receive a portion of the company's assets in the event of liquidation, redemption privilege refers to the ability to redeem shares from the company at a predetermined price, and cumulative privilege refers to the accumulation of dividends if they are not paid in a given year. None of these concepts are directly related to the issuance of new stock.

When a Corporation Issues Additional Stock,current Shareholders Will Be Able