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Essay / Research Paper Abstract
This 8 page paper explains what is meant by a rights issue, how they work along with the advantages and disadvantages a rights issue will bring to both the company and the shareholders. The bibliography cites 6 sources.
Page Count:
8 pages (~225 words per page)
File: TS14_TErighti.rtf
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Unformatted sample text from the term paper:
a subsidiary company. However, an alternative method will be by making a share offer, selling more shares in the company. There are several methods that may be used here,
however, there are advantages and disadvantages to each. One of the methods that is used is that of a rights issue. In this paper we will consider what a rights
issue is, and the advantages and disadvantages of using a rights issue. The issue of new shares is not common in quoted companies. There are many reasons for this.
The issue of new shares is often a matter of concern for companies. The need is often one of rising capital without increasing debt, however, when new shares are created
the effect can be seen as a dilution. There are now changes in the company, other than the increased capital from the shares, and there are a large increase in
the number of shares. This means the aggregate value falls. If a company is undervalues this is not a problem, however, where the finds are raised so that borrowing can
be reduced this is an impact they may be seen (Howells and Bain, 1996). If it is a matter of seeking to increase the number of shares due to high
share prices on individual shares the a share split may be used. However, if the share issues id deemed to be controversial, then new way of limiting the effect may
be for a rights issue to be made. In a rights issues the finds that are raised will be placed directly into the bank account of the company, the
shareholders do not benefit directly from this (Howells and Bain, 1996). This is an issue of new share, but it is only offered to qualifying individuals, these are usually existing
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