Virat has $\displaystyle 2500$ shares of Suraj Bulb Ltd. He received an offer from Suraj Bulb Ltd. to purchase two shares for every ten shares held by him. Identify and explain the method of floatation of new issue reflected in the above lines.

The method of floatation of new issue reflected in the • above lines is Right issue. It is a method of floatation of new issue in which the shareholders are offered the ‘right’ to buy new shares in • proportion to the number of shares that they already possess. It is the privilege given to existing shareholders to subscribe to a new issue of shares according to the terms and conditions of the company.