Question：When a company makes a rights issue of equity shares which of the following effects will the issue have?

　　A. Assets are increased

　　B. Retained earnings are reduced

　　C. Share premium account is reduced

　　D. Investments are increased

　　The correct answer is: Assets are increased.

　　A rights issue will increase cash and therefore assets. Retained earnings remain the same and the share premium account will be increased.