The right of shareholders to receive new shares when new shares are issued is called:
A)a residual owner.
B)a general cash offer.
C)a private placement.
D)a pre-emptive right.

Question

Quizplus · Accepted Answer

The right of shareholders to receive new shares when new shares are issued is called a pre-emptive right. This gives existing shareholders the opportunity to maintain their proportional ownership in the company by purchasing new shares before they are offered to the general public. Choice A (residual owner) refers to the residual claim on assets and earnings of a company after all obligations to creditors and other stakeholders have been met. Choice B (general cash offer) refers to an offer made to the general public to purchase shares in a company. Choice C (private placement) refers to the sale of shares in a company to a limited number of private investors rather than the general public.

The Right of Shareholders to Receive New Shares When New