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SSC Financial and Cost Accounting P-1 QUESTION #6128
Question 1

A company needs to raise finance to build a factory. Which action would best protect existing shareholders' interests?

  • A bonus issue of shares
  • A fully subscribed rights issue of shares✔️
  • Issue of debentures
  • A general issue of ordinary shares to the public
Correct Answer Explanation

Option B (Rights issue) is correct.

A rights issue gives existing shareholders the right to buy new shares in proportion to their holdings — maintaining proportional ownership and avoiding dilution.

  • A: Bonus issue does not raise new finance.
  • C: Debentures are debt, not equity.
  • D: General issue dilutes existing shareholders' ownership.