What are Bonus shares/issues ? What are the reasons behind a company's bonus shares ?
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Modified on: Fri, 23 Feb, 2024 at 1:18 PM
A bonus issue is when a company issues additional shares to its existing shareholders at no cost. Bonus issue is a way for a company to reward its shareholders without paying a dividend. It increases the number of shares available in the market and more liquidity in the stock.Bonus shares are distributed based on the number of shares already held by each shareholder, and they are usually issued in a certain ratio. Please refer to the below example for your reference :
Scenario 1 : Let's assume if a XYZ company announces a bonus ratio of 1:2 then you will receive one additional share for every two shares you held in your demat account.
Scenario 2 : Let's assume if an ABC company announces a bonus ratio of 2:1 then you will receive two additional shares for every one share you held in your demat account.
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