SIE practice questioneasyPreemptive Rights
Why are preemptive rights issued to shareholders?
- ATo guarantee dividend payments
- BTo allow them to maintain their proportional ownership✓ Correct answer
- CTo increase the company's share price
- DTo convert debt to equity
Explanation
Why B — To allow them to maintain their proportional ownership
Preemptive rights let existing shareholders maintain their ownership percentage in future equity offerings. They do not guarantee dividends, alter share price directly, or convert debt.
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