NISM Certifications · NISM-Series-XV: Research Analyst · Introduction to Securities Market
A company raises funds by issuing new shares to existing shareholders in proportion to their holdings at a price offered to them. This method of raising capital is called:
This is a rights issue: new shares are offered to existing shareholders in proportion to their holdings, raising fresh capital. A bonus issue involves no cash, an offer for sale only transfers existing shares, and a buyback reduces shares by returning money to shareholders.
- ARights issueCorrect
- BBonus issue
- COffer for sale
- DBuyback
Explanation
A rights issue offers new shares to existing shareholders in proportion to holdings and brings fresh money into the company. A bonus issue capitalises reserves without cash, an offer for sale transfers existing shares, and a buyback returns cash to shareholders.
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