PRC-3 · Chapter 4 · Question 6 of 65
A startup tech company issues new shares to a group of investors to raise capital. What is a potential drawback of this equity financing method for the original founders?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) It dilutes their ownership and control of the company
Explanation
Issuing new shares means new investors gain voting rights, resulting in the dilution of ownership and control for existing shareholders.
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