Question

Equity shares cannot be issued for the purpose of ______.

Options

• Cash Receipts

• Purchase of assets

• Redemption of debentures

• Distribution of dividend

Answer 1

Equity shares cannot be issued for the purpose of Distribution of dividend.

Explanation:

A company can issue equity shares for raising cash, for purchase of assets, or even for redeeming debentures (by converting debt into equity). But equity shares cannot be issued for the distribution of dividend, since dividends are paid only out of profits or reserves, not by issuing new shares.