Private placement method saves time and cost.

Question

State, whether the following statements is True or False. 

Private placement method saves time and cost. 

Options 

• True
• False

Answer 1

True 

Explanation: When the promoters of a public company are confident of raising capital through private sources, the company does not invite the general public to subscribe for shares instead the company promotes the private placement of shares to promoters, friends and other private sources. The company is not required to issue a prospectus. Also, no applications are invited for issue of shares. This saves time, cost and money.