Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Retained Earnings

Financial Accounting

12. Stockholders' Equity

Retained Earnings

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Multiple Choice

The right to maintain one's proportionate ownership in a corporation when new shares are issued is known as the right of:

Voting right

Liquidation right

Preemptive right

Dividend right

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Verified step by step guidance

Understand the concept of 'Preemptive Right': This is a shareholder's right to maintain their proportionate ownership in a corporation when new shares are issued. It ensures that existing shareholders can purchase additional shares before they are offered to the public, preventing dilution of their ownership.

Compare the given options: Voting right refers to the ability to vote on corporate matters, Liquidation right pertains to the right to receive a share of assets upon liquidation, and Dividend right is the entitlement to receive dividends. None of these options relate to maintaining ownership proportion during new share issuance.

Identify the correct answer: The 'Preemptive Right' is specifically designed to protect shareholders from ownership dilution when new shares are issued.

Relate the concept to real-world scenarios: For example, if a corporation issues new shares to raise capital, shareholders with preemptive rights can purchase these shares in proportion to their existing ownership before they are offered to others.

Summarize the importance: The preemptive right is a key mechanism for safeguarding shareholder interests and ensuring fairness in corporate equity distribution.