The preemptive right enables a shareholder to
A) share proportionately in any new issues of shares in the same class.
B) receive cash dividends before other classes of shares without the preemptive right.
C) sell shares back to the corporation at the option of the shareholder.
D) receive the same amount of dividends on a percentage basis as the preferred shareholders.

Question

Quizplus · Accepted Answer

The preemptive right allows a shareholder to maintain their proportional ownership in the company by purchasing new shares in the same class before they are offered to the public. This ensures that existing shareholders are not diluted by the issuance of new shares.

The Preemptive Right Enables a Shareholder to