A preliminary prospectus is known as a:
Click on the arrows to vote for the correct answer
A. B. C. D.B
The correct answer is B. Red herring.
A preliminary prospectus, also known as a "red herring," is a document filed with the Securities and Exchange Commission (SEC) that outlines the details of a proposed securities offering. The preliminary prospectus includes information about the company, its management team, financial information, and the securities being offered.
The term "red herring" comes from the disclaimer printed in red ink on the cover of the document, which states that the information in the document is incomplete and subject to change. The SEC requires that all potential investors receive a copy of the preliminary prospectus before they can invest in the offering.
The other answer choices are unrelated to the concept of a preliminary prospectus. A golden parachute is a compensation package provided to executives in the event of a merger or acquisition. Blue sky refers to state securities laws that regulate the sale of securities. A green shoe is an option that allows underwriters to sell additional shares in a securities offering if demand exceeds expectations.