Share Allotment Calculation
This problem involves calculating the number of shares a specific applicant (A) applied for, given a scenario of pro-rata share allotment.
Pro-Rata Allotment Analysis
The company invited applications for 2,000 shares. Applications were received for 3,000 shares. However, a pro-rata allotment was specifically made only on applications totaling 2,400 shares. This implies that applications for 600 shares (3,000 - 2,400) were either rejected or treated differently. The pro-rata ratio applies to the group of applicants who applied for 2,400 shares.
Calculating Shares Applied For
Step 1: Determine the Pro-Rata Ratio
The pro-rata ratio is the proportion of shares allotted relative to the shares applied for within the group considered for pro-rata allotment.
- Total shares allotted (intended issue size): 2,000 shares
- Total shares applied for (in the pro-rata group): 2,400 shares
The pro-rata factor is calculated as:
$ \text{Pro-rata Factor} = \frac{\text{Total Shares Allotted}}{\text{Total Shares Applied for (Pro-rata Group)}} $
$ \text{Pro-rata Factor} = \frac{2000}{2400} = \frac{20}{24} = \frac{5}{6} $
This ratio means that for every 6 shares applied for by an applicant in this group, 5 shares were allotted.
Step 2: Calculate Shares Applied by Applicant A
Let the number of shares applied for by A be '$x$'. We know A was allotted 40 shares.
Using the pro-rata factor:
$ \frac{\text{Shares Allotted to A}}{\text{Shares Applied for by A}} = \text{Pro-rata Factor} $
$ \frac{40}{x} = \frac{5}{6} $
Step 3: Solve for x
Cross-multiply to solve for '$x$':
$ 5 \times x = 40 \times 6 $
$ 5x = 240 $
$ x = \frac{240}{5} $
$ x = 48 $
Therefore, applicant A must have applied for 48 shares.
Important Questions from Shares
Discount allowed on the reissue of forfeited shares cannot exceed
Rate of return on equity share capital is calculated after deducting _____ and _____ from the net profit before interest.
Which of the following statements are true?
1. A company cannot purchase its own equity shares.
2. A company can issue its shares at a discount by passing a special resolution.
3. The interest rate charged on calls-in-arrear and the interest rate payable on calls-in-advance are the same as per provisions of Table-F of Schedule-I of the Companies Act, 2013.
Identify the correct sequence of activities involved in the process of buy back of shares.
A. Letter of offer to the shareholders.
B. Opening of bank account.
C. Approval for Extra-ordinary General Meeting.
D. Convening board meeting.
E. Declaration of Solvency.
Choose the correct answer from the options given below:
Identify the correct statements in context of equity financing.
A. Borrowing limit increases as a consequence of increase in number of shares.
B. Ordinary shares are generally not redeemable.
C. Issue of new shares dilutes the EPS if the profits do not increase immediately in proportion to increase in number of shares.
D. A company is not legally oblidged to pay dividend.
E. Ordinary shares are less riskier from investor's perspective.
Choose the correct answer from the options given below:
