Question
Which of the following statements is false? Select the correct answer from the options listed below The bonus issue of a share is a means of raising long-term finance Share issues can be issued in several ways The placing of a share does not involve any invitation to the general public Long-term debt is an example of business long-term finance
Answer
3.6
(220 Votes)
Vina
Elite · Tutor for 8 years
Answer
The false statement given the options is: "The bonus issue of a share is a means of raising long-term finance". Like elucidated over, a bonus share issue is in reality a way of rewarding a company's shareholders. As such it involves issuing of extra shares free to existing shareholders. Thereby it's only changing the constitution of existed issued shares and raising no extra sources of finance. Thus revealing it brings no good source of capital directly, instead declared by companies having a large reserve but less cash willing in some form offers better market reputation or maintains low share price and this does not in actuality involve raising of finance.
Explanation
## Step 1: Assess each statement one at a time:The legitimacy of each potential answer must be characterized to ascertain the false statement. ## The first statement claim is about the "bonus issue of a share". Typically, it's a form of reward to shareholders of a company by issuing extra shares in the form of dividends without additional costs so it's not a means of raising long-term finance making this statement False.## As for the second statement which claims "Share issues can be issued in several ways", This is known to be a true statement as companies can issue shares in multiple methods depending on strategies they are using such as Rights Issues, Private Placements, Initial Public offerings (IPO's) and Bonus Issues. ## The third statement goes about "The placing of a share does not involve any invitation to the general public", Clearly, this is also a true statement. placing of shares or private placements in finance are an offering of securities to a likely small group of potential buyers and are not to the general public unlike the Initial Public Offer (IPO).## The fourth statement describes "Long-term debt is an example of a business' long-term finance", This is Possibly a true statement as Long-term debt can be taken to fund Business expenses or expansions further, making this a source of long lasting finances and increments to the Business which characterizes it as an example of business' long-term finance.