NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Introduction to Securities Markets
A listed company issues new shares only to its existing shareholders in proportion to their current holdings. This method of raising capital is called:
This is a rights issue. New shares are offered to existing shareholders in proportion to their holdings, and they must pay for them. A bonus issue distributes free shares from reserves, while an IPO is a first public offering.
- AInitial public offer
- BBonus issue
- CRights issueCorrect
- DOffer for sale
Explanation
A rights issue offers new shares to existing shareholders in proportion to their holding, usually at a price set by the company, and they pay for them. A bonus issue is free capitalisation of reserves, so it is wrong here. An IPO is the first offer to the public, and an OFS is a sale by promoters of existing shares.
Did you get it right without looking?
One question tells you little. A timed set on Introduction to Securities Markets shows your real accuracy, how long you take and where you lose marks.
More Introduction to Securities Markets questions
- Which statement about the settlement cycle for equity cash market trades in India is correct?
- A stock index has a base value of 1,000 and a base-period market capitalisation of ₹5,00,000 crore. If the current free-float market capital…
- In the Indian securities market, which entity is the primary regulator that frames rules for stock exchanges, depositories and intermediarie…
- An investor buys a share at ₹400, receives a dividend of ₹20 during the year, and sells it at ₹440 at year end. What is the total holding pe…
- A stock index fund tracking the Nifty 50 holds a portfolio whose price movements mirror the index. Which type of risk can such a fund NOT re…
- Which of the following instruments is traded in the money market of India?