The correct answer is D. New issue.
A new issue is the issuance of new shares by a company. This can be done to raise capital, to increase the company’s share capital, or to make a takeover bid. When a company issues new shares, it dilutes the ownership of existing shareholders. This means that each existing shareholder owns a smaller percentage of the company after the new shares are issued.
Companies may resort to new issues to avoid dividend payments if they are struggling to make a profit. If a company does not have enough cash to pay dividends, it may issue new shares to raise the necessary funds. This can be a controversial move, as it can dilute the ownership of existing shareholders. However, it can also be seen as a way to keep the company afloat and avoid bankruptcy.
Share splitting and declaring bonus shares are methods that companies can use to increase the number of shares outstanding. This can be done to make the shares more affordable for investors, or to increase the company’s share price. However, these methods do not dilute the ownership of existing shareholders.
A rights issue is a type of new issue where existing shareholders are given the right to buy new shares at a discount. This can be a way to raise capital without diluting the ownership of existing shareholders. However, it can also be seen as a way to force shareholders to invest more money in the company.
In conclusion, the correct answer is D. New issue. A new issue is a method that a firm can resort to avoid dividend payments. This is because when a company issues new shares, it dilutes the ownership of existing shareholders. This means that each existing shareholder owns a smaller percentage of the company after the new shares are issued. If a company does not have enough cash to pay dividends, it may issue new shares to raise the necessary funds. This can be a controversial move, as it can dilute the ownership of existing shareholders. However, it can also be seen as a way to keep the company afloat and avoid bankruptcy.