The correct answer is A. no par stock.
No par stock is a type of stock that does not have a designated face value. This means that the stock is not assigned a specific dollar amount when it is issued. Instead, the value of no par stock is determined by the market, based on supply and demand.
No par stock was first introduced in the United States in 1913. At the time, it was seen as a way to make stock more affordable for small investors. However, no par stock has since become controversial, as some people believe that it can lead to fraud and abuse.
One of the main concerns about no par stock is that it can be used to inflate the value of a company’s assets. For example, a company could issue no par stock at a very low price, and then use the proceeds from the sale of the stock to purchase assets at an inflated price. This would artificially increase the company’s assets, and make it appear more profitable than it actually is.
Another concern about no par stock is that it can be used to dilute the ownership of existing shareholders. For example, a company could issue a large number of new shares of no par stock, which would dilute the ownership of existing shareholders. This would make it more difficult for existing shareholders to control the company, and could also reduce the value of their shares.
Despite these concerns, no par stock remains a popular form of equity financing. This is because it can be used to raise capital more quickly and easily than other types of stock. Additionally, no par stock can be used to create a more flexible capital structure, which can be beneficial for companies that are growing rapidly.
Here is a brief explanation of each option:
- A. no par stock: Shares having no face value are known as no par stock.
- B. at par stock: Shares that have a face value are known as at par stock. The face value is the amount that is printed on the stock certificate.
- C. equal stock: Shares that are all of the same class and have the same rights and privileges are known as equal stock.
- D. debt equity stock: Shares that are a combination of debt and equity are known as debt equity stock. These shares typically have a fixed dividend, but they also have the potential to appreciate in value.