Bonus

By Author: Ravsan
Total Articles: 3
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We discussed about Bonus in the earlier post. Bonus shares are the additional shares that a company gives to its existing shareholders on the basis of shares owned by them. Bonus shares are issued to the shareholders without any additional cost.

ADVANTAGES OF BONUS SHARES
• There is no need for investors to pay any tax on receiving bonus shares.
• It is beneficial for the long-term shareholders of the company who want to increase their investment.
• Bonus shares enhance the faith of the investors in the operations of the company because the cash is used by the company for business growth.
• When the company declares a dividend in the future, the investor will receive higher dividend because now he holds larger number of shares in the company due to bonus shares.
• Bonus shares give positive sign to the market that the company is committed towards long term growth story.
• Bonus shares increase the outstanding shares which in turn enhances the liquidity of the stock.
• The perception of the company's size increases with the increase in the issued share capital.

When ...
... the company issues bonus shares, the term “record date” is used along with it. We discussed about dividend in the earlier post.

Record date is a cut-off date set by the company. If you are the owner of the shares of the company on this cut-off date then you are eligible to receive the bonus shares. The record date is set by the company so that they can find the eligible shareholders and distribute bonus shares to them.

So what is Right issue?
It will be detailed on 22/07/2020, Wednesday

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