Correct Answer - D
Following are the methods of raising capital in the primary market:
(i) Public Issue: Under this method, the company issues a prospectus and invites the general public to
purchase shares or debentures.
(ii) Offer for Sale: Under this method, firstly the new securities are offered to an intermediary (generally firms
of stock brokers) at a fixed price. They further resell the same to the general public at a higher price. The
advantage of doing this is that the issuing company feels free from the tedious work of making a public
issue.
(iii) Private Placement: Under this method, the company sells securities to the big financial institutions or
brokers instead of selling them to the general public. They, in turn, sell these securities to the selected clients
at a higher price. This method is preferred as it is a cheaper method of raising funds as compared to a public
issue.
(iv) Right Issue: This method is used by those companies who have already issued their shares. When an
existing company issues new shares, first of all it invites its existing shareholders. This issue is called the
right issue. In this case, the shareholder has the right either to accept the offer for himself or assign a part or
all of his rights in favour of another.
