Question

Venture capitalists often hold convertible preferred stock with voting rights. What does this stock provide in the event of a company sale or liquidation?

a) Priority in decision-making.
b) Priority in dividend payouts.
c) Priority in stock buybacks.
d) Priority in employee benefits.

Answer 1

Convertible preferred stock with voting rights held by venture capitalists provides priority in decision-making in a company sale or liquidation.

Step-by-step explanation:

Convertible preferred stock with voting rights held by venture capitalists provides priority in decision-making in the event of a company sale or liquidation. This means that the holders of this stock have the right to vote on important matters affecting the company, such as the approval of a sale or liquidation. Their votes carry more weight than those of common stockholders because of the preferred status of their shares.