Practicing Success

Target Exam

CUET

Subject

Business Studies

Chapter

Financial Markets

Question:
Which of the following is a method used by a company to raise capital in the primary market?
Options:
Public Offer
Private placement
Offer for sale
All of the above
Correct Answer:
All of the above
Explanation:
There are various methods of floating new issues in the primary market :
1. Offer through Prospectus: Offer through prospectus is the most popular method of raising funds by public companies in the primary market. This involves inviting subscription from the public through issue of prospectus.
2. Offer for Sale: Under this method securities are not issued directly to the public but are offered for sale through intermediaries like issuing houses or stock brokers. In this case, a company sells securities enbloc at an agreed price to brokers who, in turn, resell them to the investing public.
3. Private Placement: Private placement is the allotment of securities by a company to institutional investors and some selected individuals.