Question

"Preemptive rights" means that Multiple Choice existing shareholders can prevent management from issuing additional common stock. common shareholders can "preempt" preferred shareholders for dividends. existing shareholders are guaranteed an opportunity to retain their proportional share of ownership. management can preempt the right of shareholders to receive dividends if earnings are down.

Answer 1

Answer:

Preemptive rights mean:

• existing shareholders are guaranteed an opportunity to retain their proportional share of ownership.
• management can preempt the right of shareholders to receive dividends if earnings are down.

Explanation:

Preemptive rights are a clause in an option, security or merger agreement that gives the investor the right to maintain his or her percentage ownership of a company by buying a proportionate number of shares of any future issue of the security.

In that case,

• existing shareholders are guaranteed an opportunity to retain their proportional share of ownership.
• management can preempt the right of shareholders to receive dividends if earnings are down.

Answer 2

Answer:

existing shareholders are guaranteed an opportunity to retain their proportional share of ownership.

Explanation:

Preemptive right of shareholders is defined as the right of existing shareholders to buy shares before they are made available to the general public.

This is usually done by giving the shareholders an option of buying a certain amount of new shares issued.

This is important to shareholders because it reduces dilution of ownership, where new shareholders gain a higher proportional ownership of the business.