Canadian Securities Course (CSC) Practice Exam

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What type of privilege allows existing shareholders to buy shares proportionate to their ownership?

  1. Stock split

  2. Rights and warrants

  3. Equity share

  4. Preferred shares

The correct answer is: Rights and warrants

Rights and warrants give existing shareholders the privilege to buy shares proportionate to their ownership. This is different from a stock split as a stock split involves the company issuing additional shares, while in rights and warrants, the existing shareholders have the right to purchase additional shares. Equity shares and preferred shares do not necessarily give existing shareholders this privilege, as the distribution of shares may be determined by other factors such as company performance or investor agreements. Therefore, option B is the correct answer.

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