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What is the primary advantage of issuing bonus shares for a company?
- a)It increases the taxable income for shareholders.
- b)It raises funds for the company without affecting fund flow.
- c)It reduces the number of shares in the market.
- d)It decreases the market value of existing shares.
Correct answer is option 'B'. Can you explain this answer?
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What is the primary advantage of issuing bonus shares for a company?a)...
Advantage of Issuing Bonus Shares
Therefore, the primary advantage of issuing bonus shares for a company is that it raises funds without affecting the fund flow, enabling the company to bolster its financial position and pursue growth opportunities.
- Raises funds for the company without affecting fund flow: Issuing bonus shares is a way for a company to increase its share capital without affecting its cash reserves. When bonus shares are issued, the company allocates new shares to existing shareholders in proportion to their current holdings. This means that no cash is paid out to shareholders, and the company's cash reserves remain untouched. By issuing bonus shares, the company can strengthen its capital base and use the funds for various purposes such as expansion, acquisitions, or debt repayment.
Therefore, the primary advantage of issuing bonus shares for a company is that it raises funds without affecting the fund flow, enabling the company to bolster its financial position and pursue growth opportunities.
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What is the primary advantage of issuing bonus shares for a company?a)...
Issuing bonus shares allows a company to capitalize its profits and distribute them among existing shareholders without affecting fund flow. Since bonus shares are given for free, there is no additional financial burden on shareholders. This action increases the number of shares but doesn't change the company's overall value, as the market value per share is adjusted accordingly.
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What is the primary advantage of issuing bonus shares for a company?a)It increases the taxable income for shareholders.b)It raises funds for the company without affecting fund flow.c)It reduces the number of shares in the market.d)It decreases the market value of existing shares.Correct answer is option 'B'. Can you explain this answer?
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Solutions for What is the primary advantage of issuing bonus shares for a company?a)It increases the taxable income for shareholders.b)It raises funds for the company without affecting fund flow.c)It reduces the number of shares in the market.d)It decreases the market value of existing shares.Correct answer is option 'B'. Can you explain this answer? in English & in Hindi are available as part of our courses for B Com.
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