Assertion :Right shares are given to equity shareholder in proportion to their share capital in the company. Reason: Equity shareholders assume the greatest risk in the company.

Both Assertion and Reason are correct and Reason is the correct explanation for Assertion

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Assertion is correct but Reason is incorrect

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Both Assertion and Reason are correct but Reason is not the correct explanation for Assertion

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Assertion is false but Reason is true

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Solution

The correct option is C Both Assertion and Reason are correct but Reason is not the correct explanation for Assertion
Right shares are the shares that are issued by a company for its existing shareholders. The existing shareholders have their right to subscribe to these shares and rights shares are issued in proportion to their share capital in the company.
Those who own stock in a company run the risk of having share prices fall due to poor earnings, negative news related to the issuing company, or general market fluctuations. Furthermore, if a company performs poorly, it may opt not to issue dividends, thus eliminating a source of income for its investors. Hence the shareholders have the greatest risk as well as more benefits.

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