How does the rights issue impact the balance sheet? Can someone please explain this in detail? I am not able to establish a connection to the company reserves. For example, if a company raises an additional £70m from a rights issue of 100 million shares of par value 25p, then the issued share capital would increase by £25m and the share premium account in the reserves would increase by £45m. Thanks, Bijal
Hi Bijal The numbers in your example look fine to me. When a company has a rights issue, the capital raised is split over 2 lines in the balance sheet - the share capital and the share premium account (which is one component of the reserves). As you said in your example, the share capital always gets an amount equal to "number of issued shares x par value of shares". The balance of the capital raised then goes into the share premium account. I'm not sure what your question or doubt about your understanding is confused: sorry!)? If there's still an issue, could you post again to clarify what's confusing? Thanks
