Commerce Exam > Commerce Videos > Issue of shares (Part - 1)
Issue of shares (Part - 1) Video Lecture - Commerce
FAQs on Issue of shares (Part - 1) Video Lecture - Commerce
| 1. What is the process of issuing shares? |  |
Ans. The process of issuing shares involves several steps. First, a company needs to determine the number of shares it wants to issue and the price at which they will be offered. Then, the company prepares a prospectus or offer document that provides detailed information about the shares, the company's financials, and its future plans. The shares are then offered to the public through various channels such as initial public offerings (IPOs) or private placements. Interested investors can then apply for the shares and, once allotted, the shares are listed on a stock exchange for trading.
| 2. What is the difference between primary and secondary market in share issuance? | |
Ans. The primary market is where shares are first issued to the public. It is the market where companies raise capital by selling newly issued shares to investors. On the other hand, the secondary market is where already issued shares are traded between investors. In the primary market, the company receives the proceeds from the sale of shares, while in the secondary market, the buying and selling of shares occur among investors without any involvement of the company.
| 3. How does the issuance of shares benefit a company? | |
Ans. Issuing shares can provide several benefits to a company. Firstly, it helps in raising capital for the company's expansion, research and development, or debt repayment. Secondly, it increases the company's public profile and can attract new investors. Additionally, issuing shares can improve the company's liquidity and financial flexibility. Moreover, it can also be a way for the company's founders or existing shareholders to monetize their investment by selling a portion of their shares in the market.
| 4. What are the risks associated with issuing shares? | |
Ans. There are certain risks associated with issuing shares. One of the main risks is dilution, where the existing shareholders' ownership percentage decreases due to the issuance of new shares. This can lead to a decrease in control and voting power for the existing shareholders. Additionally, if the shares are not priced appropriately or the market conditions are unfavorable, the company may not be able to raise the desired amount of capital. Moreover, issuing shares also exposes the company to increased scrutiny and reporting requirements, which can be time-consuming and costly.
| 5. What are the different types of shares that can be issued by a company? | |
Ans. A company can issue various types of shares, including common shares and preferred shares. Common shares are the most basic form of shares, representing ownership in a company and entitling the shareholders to voting rights and a share of profits. Preferred shares, on the other hand, have certain preferences over common shares, such as a fixed dividend payment or priority in case of liquidation. Preferred shareholders usually do not have voting rights but have a higher claim on the company's assets in case of bankruptcy. Additionally, a company may also issue different classes of shares with different rights and privileges.
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Dec 23, 2024 Last updated |
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