why companies might issue bonus shares?
- PKW ( PJR )Lv 71 十年前最愛解答
Bonus shares are additional shares issues given without any cost to existing shareholders. These shares are issued in a certain proportion to the existing holding. So, a 2 for 1 bonus would mean you get two additional shares -- free of cost -- for the one share you hold in the company. Bonus shares are issued by using reserves, normally the retained profit of the company. So the cash position of the company remains unchanged as no cash are being paid out, unchanged financial liquidity. As the issued capital has been increased and no cash is being paid out, creditors or other interested parties may think the company is putting more money in running the business for a expansionary prospect.