Question

A company invited applications for 1,00,000 shares but received applications for 1,50,000 shares. Shares were allotted on a pro-rata basis to applicants of 1,20,000 shares. How many shares were refused outright?

• A. 20,000
• B. 30,000
• C. 50,000
• D. 1,20,000

Hint:

Pro-rata allotment always applies to a specific "group" of applicants. Any applicant outside this defined group usually has their application money refunded.

Answer 1

The Correct Option is B

Step 1: Understanding the Question:
In an over-subscription scenario, a company can choose to allot shares on a pro-rata basis to some applicants and reject others. We need to find the number of shares for which the applications were rejected (refused outright).

Step 2: Key Formula or Approach:
\[ \text{Shares Refused} = \text{Total Applications Received} - \text{Applications Accepted for Allotment} \]

Step 3: Detailed Explanation:
1. Total applications received by the company = 1,50,000 shares.
2. Number of applications considered for pro-rata allotment = 1,20,000 shares.
3. These 1,20,000 applicants were allotted the total available shares of 1,00,000.
4. The remaining applications that were not part of the pro-rata group are the ones refused outright.
\[ \text{Refused shares} = 1,50,000 - 1,20,000 = 30,000 \text{ shares.} \]

Step 4: Final Answer:
The company refused 30,000 share applications outright.