- 5 Marks
FM – April 2022 – L2 – Q4c – Sources of finance: equity
Explain the concept of pre-emptive rights and rights issues, and discuss the advantages to a company for using a rights issue to raise additional capital.
Question
Existing shareholders have some advantages available to them that potential shareholders interested in buying shares from the company do not have. Some of those advantages are pre-emptive rights and rights issues.
Required:
i) Explain the term Pre-emptive rights. (2 marks)
ii) Explain the concept of a Rights issue and explain ONE (1) advantage to a company for using rights issues to raise additional capital. (3 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Equity Financing, Pre-emptive rights, Rights Issue, Shareholder right
- Level: Level 2
- Topic: Sources of finance: equity
- Series: APR 2022
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