The pre-emptive right of a common stockholder is the right to
A) Share proportionately in corporate assets upon liquidation.
B) Share proportionately in any new issues of stock of the same class.
C) Receive cash dividends before they are distributed to preferred stockholders.
D) Exclude preferred stockholders from voting rights.

Question

Quizplus · Accepted Answer

The pre-emptive right of a common stockholder grants them the right to maintain their proportionate ownership in the company by purchasing new issues of stock before they are offered to the public. This ensures that the common stockholders do not see their ownership percentage diluted by the issuance of new shares. Options A, C, and D are not related to the pre-emptive right.

The Pre-Emptive Right of a Common Stockholder Is the Right