Given below are two statements:
Assertion (A): Some companies that cannot afford a public issue choose to use private placement.
Reason (R): Private placement is the allotment of securities through the on-line system of the stock exchange.
In the light of the above statements, choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → (A) is true but (R) is false.
Assertion (A): Some companies that cannot afford a public issue choose to use private placement. — True. Raising money from the primary market can be expensive because of many mandatory and non-mandatory expenses. So some companies cannot afford a public issue and choose private placement.
Reason (R): Private placement is the allotment of securities through the on-line system of the stock exchange. — False. Private placement is the allotment of securities to institutional investors and some selected individuals. Issuing capital through the on-line system of the stock exchange is an e-IPO.
NCERT (Pre-rationalised Edition):
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