BONUS ISSUE

Presented By:
Ishu Kumar
BONUS ISSUE

 Bonus Issue is the distribution of share

free of cost to existing shareholder.
 In India bonus shares are issued in
addition of cash dividend.
 In India companies can supplement
cash dividend by bonus issues.
 Bonus share increase the number of
outstanding shares of the co.
REASONS FOR ISSUING BONUS
SHARE-
o It increases the number of
outstanding shares.
 The share capital base increases
and the company may achieve a
respectable size in the eyes of
investing co.
Cont…………
 Helps in creating an image among
shareholders.
 It improves the prospects of raising
additional funds.
 The shareholders proportional
ownership remain unchanged.
ADVANTAGES
 Advantages to shareholder.
 Advantages to company.
ADVANTAGES TO
SHAREHOLDERS
 Tax benefit
 Indication of higher future profit.
 Future dividend may increase.
 Psychological value.
ADVNTAGES TO COMPANY
 Does not effect the working capital
of the company.
 Available capital can be invested in
profitable business.
 Helps in increasing the
creditworthiness of the co.
 The B/S reveals a more realistic
picture of the co.
CONT……..
 It is the cheapest method of raising
additional capital.
 It helps the co. to get rid of market
influence.
DISADVATAGES
 Issue of bonus share lead market to
drastic fall in future rate of
dividend.
 The fall in rate of dividend will result
in fall of market price of share.
 Reserve of the co. after the bonus
issue decline & leave lesser security
to shareholder.
CONDITIONS FOR THE ISSUE OF
BONUS SHARE-

 A Co. is not allowed to declare

bonus share unless partly paid-
share have been converted into fully
paid-up share.
 Bonus shares are made out of share
premium and free reserve.
 A co. can issue bonus shares once
in a year.
CONT…….
 The amount of bonus issue should
not exceed the paid-up capital.
 Company intending to issue bonus
share should not be in default of
payments of statuary dues to
employees and term loan to
financial institutions.