Bonus Issue
Contents
Unlocking the World of Bonus Issues: A Comprehensive Guide
Unveiling Bonus Issues
What is a Bonus Issue?
Delving into the concept of bonus issues, also known as scrip issues or capitalization issues, and their significance in offering additional shares to existing shareholders.
Key Takeaways:
Exploring the essence of bonus issues, including their role as an alternative to cash dividends and their impact on a company's share capital and net assets.
Understanding the Mechanics
Mechanics of Bonus Issues:
Understanding the rationale behind bonus issues, their implications for shareholders' liquidity needs, and their contribution to restructuring company reserves.
Shareholders' Equity:
Analyzing the impact of bonus issues on shareholders' equity, the absence of dilution, and the distribution of bonus shares based on each shareholder's stake.
Tax Considerations:
Exploring the tax implications of bonus shares, including their non-taxable nature and potential capital gains tax upon sale.
Advantages and Disadvantages
Pros and Cons:
Evaluating the advantages of issuing bonus shares, such as enhanced attractiveness to investors and increased affordability for retail investors, alongside the drawbacks, including reduced cash reserves and potential decline in future dividends.
Bonus Shares vs. Stock Splits
Comparative Analysis:
Comparing and contrasting bonus shares with stock splits, elucidating the similarities and differences in their impact on share capital, cash reserves, and investor perception.