Multiple choice

A red herring prospectus is issued by a

  1. company to raise funds through a commercial paper

  2. company to raise funds from bank for a long term project

  3. company to show information pertaining to the company's operations and in which price of the share is not disclosed

  4. bank to raise funds from the overseas lenders
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A red herring is a preliminary prospectus that is filed by a company with the Securities and Exchange Commission (SEC), usually in connection with the company's initial public offering. A red herring prospectus contains most of the information pertaining to the company's operations and prospects. It does not include key details of the issue, such as its price and the number of shares offered. 

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