Share market participants can regard a rights issue favourably because:

Question

Quizplus · Accepted Answer

A rights issue increases the number of shares outstanding, which increases the equity portion of the company's capital structure and reduces financial risk for the company. However, it does not necessarily affect the capital structure for shareholders. Therefore, choice A is incorrect. While shareholders can participate in the rights issue without having to pay the subscription price, this does not necessarily mean it is a favourable aspect for them. Therefore, choice C is incorrect. Rights issues can lead to dilution of existing shares, so it may not necessarily lead to an increase in the value of shares in an investor's portfolio. Therefore, choice D is incorrect.

Share Market Participants Can Regard a Rights Issue Favourably Because