Prosperity Company holds 40% of the voting rights of MNO Co. The remaining shares was held by thousands of shareholders, each hold less than 1% of the voting rights. None of the shareholders has contractual arrangement to consult any of the others or make collective decisions. Which of the following is true regarding the above situation? (Select the best answer)
Prosperity Company holds 40% of the voting rights of MNO Co. The remaining shares was held by thousands of shareholders, each hold less than 1% of the voting rights. None of the shareholders has contractual arrangement to consult any of the others or make collective decisions. Which of the following is true regarding the above situation? (Select the best answer)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Prosperity Company holds 40% of the voting rights of MNO Co. The remaining shares was held by thousands of shareholders, each hold less than 1% of the voting rights. None of the shareholders has contractual arrangement to consult any of the others or make collective decisions. Which of the following is true regarding the above situation? (Select the best answer)
a. Prosperity does not have power over MNO Co. because its holding is not sufficient rights to give power.
b. The 40% interest above is presumed to have a de-facto control over MNO Co. because of the relative dispersion of other shares.
d. Prosperity does not power over MN because it holds only protective right.
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