What is the bonus issue of share- Smart Working

What is Bonus issue ? 

If you are investing money in stock market so It very important to know about what is bonus issue of shares?  

A bonus issue of shares is made to the existing shareholders of a company. 
Bonus share are fully paid up share 
given by the board of company. 

What is Bonus Issue
What is Bonus Issue 
Mainly investor are buy bonus share for main three reasons:

1. It's for long term investment
2.  And also for regular income. 
3 . There is no tax on dividend income

How to calculate bonus issue of share :

Bonus is issue of share is calculate by the how share already we have in our Demat 
According that we can calculate bonus issue. 
For example :  Company is giving bonus issue in the ratio of 1:4 its means if you have 4 existing  share you will get 1 addition share in free of cost.
So after the bonus issue we have total 5 share.

What are the conditions for bonus issue :

1. Company can't issue bonus share If interest on debenture and public deposits is not paid. 

2. Permission of shareholders must be required, after that company can issue of bonus share. 

3. Bonus share cannot issue within 12 month of any public issue/ Right issue

4. A loss making company can't issue bonus share.

Bonus share can be issue out of :

A company can issue bonus share from following accounts: 

1- Profit account 
2- Reserve and surplus. 
3- primary security account

Advantage of bonus issue :

These all advantage is from company point of view
1. By the bonus issue company can increase the number of outstanding share. 
2. Company can increase participation of smaller investor in company share through bonus issue. 
3. By the bonus issue liquidity of a stock is also increase. 
These are the main advantage of bonus issue.

Disadvantage of bonus issue:

There are main tree disadvantage in bonus issue of share:
1. It's reduced the rate of dividend
2. Speculation is increase which is not good for investors.
3. Comapny EPS is also go down.

That all information about the bonus issue of share I hope you enjoy the article. If you  have any confusion you can contact me.

Thanks for giving your valuable time to me.

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