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Question

What is the meaning of right issue?


A

Securities are not issued to existing shareholders at all

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B

Company offers new shares to its existing shareholders

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C

Company sells the securities to some selected institutions

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D

None of these

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Solution

The correct option is B

Company offers new shares to its existing shareholders


A rights issue is a dividend of subscription rights to buy additional securities in a company made to the company's existing security holders. When the rights are for equity securities, such as shares, in a public company, it is a non-dilutive pro rata way to raise capital.


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