The correct answer is option 4- All of the above.
A company can raise capital through the primary market in all of the form given.
The primary market is also known as the new issues market. It deals with new securities being issued for the first time. The essential function of a primary market is to facilitate the transfer of investible funds from savers to entrepreneurs seeking to establish new enterprises or to expand existing ones through the issue of securities for the first time. The investors in this market are banks, financial institutions, insurance companies, mutual funds and individuals. A company can raise capital through the primary market in the form of equity shares, preference shares, debentures, loans and deposits. Funds raised may be for setting up new projects, expansion, diversification, modernisation of existing projects, mergers and takeovers etc.
- Debentures: These are long-term debt instruments issued by a company to raise capital. Companies pay periodic interest (debenture interest) and return the principal amount on maturity.
- Equity Shares: These represent ownership in the company. When a company issues equity shares, investors buy a stake in the company and gain voting rights and a claim on the company’s profits (through dividends). Equity shares are a common way for companies to raise long-term capital.
- Preference Shares: These are a type of equity that provides investors with preferential rights over common equity shareholders. Preference shareholders usually receive dividends before equity shareholders and have a higher claim on assets in the event of liquidation, though they generally do not have voting rights.
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