Question

Discuss what is the right issue to equity shareholders

Discuss what is the right issue to equity shareholders

Homework Answers

Answer #1

When a public company wants to raise additional capital instead of going to the general public to raise the money. It can ask its existing shareholders to buy the new share. These shares are allocated to the existing shareholders based on their current share holding.

Existing shareholders benefit because of a right issue as the shares are sold at somewhat a discount to the current market price. The issuing company will have a lower cost of issuing the share and hence, is also at benefit.

Right issue helps the current shareholder's to increase their holding in the company. Weather this issue will reflect a profit or loss in the shareholder's portfolio depends on the profit and loss account of the company that it is buying the right issue for.

Do let me know in the comment section in case of any doubt.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Discuss some possible impacts on corporate performance of agency conflict between shareholders and management. Distinguish between...
Discuss some possible impacts on corporate performance of agency conflict between shareholders and management. Distinguish between the financial objectives of a right issue and a bonus issue
What is a pre-emptive right? Would this right be valuable to existing shareholders if the existing...
What is a pre-emptive right? Would this right be valuable to existing shareholders if the existing share price is low?
Supernova makes a public announcement that it will raise equity finance through a rights issue of...
Supernova makes a public announcement that it will raise equity finance through a rights issue of new shares to existing shareholders to finance a new project. The new project and the rights issue are announced simultaneously. The project has an NPV of $10 million and requires an initial outlay of $20 million. The rights issue shares will be priced at $2 each. Assume that before making public the information about the new project or its financing, the firm had 20...
Statement of Shareholders' Equity At the end of 2017, Jeffco Inc. had the following equity accounts...
Statement of Shareholders' Equity At the end of 2017, Jeffco Inc. had the following equity accounts and balances: Common shares, no par (175,000 shares issued and outstanding) $1,926,400 Retained earnings 310,000 During 2018, Jeffco engaged in the following transactions involving its equity accounts: Issued 8,000 common shares for $35 per share. Issued 1,000 shares of 9%, $120 stated value preferred shares at $125 per share. Declared and paid cash dividends of $15,000. Repurchased and cancelled 500 common shares for $52...
"Although a rights issue allows shareholders to purchase shares below market value, it may not increase...
"Although a rights issue allows shareholders to purchase shares below market value, it may not increase shareholder value' for an asset, Explain this statement and why the value of a right is described as being theoretical.
Accounting for Shareholders’ Equity Transactions The shareholders’ equity section of the consolidated balance sheet of Perry...
Accounting for Shareholders’ Equity Transactions The shareholders’ equity section of the consolidated balance sheet of Perry Corporation appeared as follows at the beginning of the year. Common stock, $1.00 par value $ 100,000 Additional paid-in-capital 1,200,000 Convertible preferred stock, no par value 800,000 Retained deficit (600,000) Treasury stock (250,000) Sharholders' equity $1,250,000 The following transactions occurred during the year: 1. Generated net income of $80,000. 2. Paid cash dividends of $220,000. 3. Issued a ten percent common stock dividend; the...
Buildex Corporation's balance sheet reported the following shareholders' equity as of December 31, 2021: Shareholders’ Equity...
Buildex Corporation's balance sheet reported the following shareholders' equity as of December 31, 2021: Shareholders’ Equity Share capital: Preferred shares, $ 4 cumulative, 30,000 shares                  authorized, 4,000 shares issued                                                       $   850,000 Common shares, unlimited shares authorized,                  175,000 shares issued                                                                           1,350,000 Total share capital                                                                                                 $ 2,000,000 Retained earnings                                                                                                        300,000 Total shareholders' equity                                                                                   $ 2,300,000 Additional information: No dividends were declared in the prior year - 2020. Dividends were fully paid in all...
At the start of the year, the firm has total shareholders' equity = $5,000. If net...
At the start of the year, the firm has total shareholders' equity = $5,000. If net income during the year was a $400 loss, dividends paid = $120, and $800 was raised from the sale of new stock, what is the end of the year value for total shareholders' equity? please show your work!
1. Accounting Relations a. A firm’s balance sheet lists $3,067 million in shareholders’ equity and $1,204...
1. Accounting Relations a. A firm’s balance sheet lists $3,067 million in shareholders’ equity and $1,204 million in liabilities. What is the carrying value of its assets? b. This firm’s equity trades at $4,569 million. What is its price-to-book ratio? 2. Comprehensive Income ACME Corporation reported net income of $222.9 million for 2016. It also unrealized gains on investments of $332.9 million and foreign currency translation gains of $16.5 million, both as part of “other comprehensive income” in its Statement...
If an all equity firm with $642,403 equity wants to issue debt and raise the debt...
If an all equity firm with $642,403 equity wants to issue debt and raise the debt ratio to 0.27 without any change in total assets, by retiring some of the equity with the proceeds of the debt issue, how much to they need to borrow?  Hint: Ask yourself what  the total assets are of this all-equity firm before they issue any debt.?  Answer  to the nearest dollar, omitting the dollar sign.