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Which of the following statement is true if the company issues bonus shares?
- a)Bonus share is an income.
- b)Total market value comes down after the bonus issue.
- c)Paid-up share capital increases with the issue of bonus shares.
- d)Fund flow is affected adversely due to bonus issues.
Correct answer is option 'C'. Can you explain this answer?
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Which of the following statement is true if the company issues bonus s...
Increased Paid-up Share Capital:
Bonus shares are issued to existing shareholders in proportion to their current shareholding. As a result, the company's paid-up share capital increases without any cash outflow. This means that the company's equity base expands, but there is no corresponding increase in its liabilities.
Impact on Total Market Value:
When a company issues bonus shares, the total number of outstanding shares increases. However, the value of the company remains the same as the total market capitalization is distributed over a larger number of shares. Therefore, the market price per share adjusts to reflect the bonus issue, but the overall market value does not change.
Effect on Fund Flow:
Issuing bonus shares does not impact the company's fund flow adversely. Since no cash is being distributed to shareholders, there is no outflow of funds from the company. In fact, bonus shares are often seen as a way to reward shareholders without affecting the company's cash reserves.
In conclusion, the statement that paid-up share capital increases with the issue of bonus shares is true. This is because bonus shares are issued out of the company's reserves and result in an increase in the company's equity base without requiring any cash outflow.
Bonus shares are issued to existing shareholders in proportion to their current shareholding. As a result, the company's paid-up share capital increases without any cash outflow. This means that the company's equity base expands, but there is no corresponding increase in its liabilities.
Impact on Total Market Value:
When a company issues bonus shares, the total number of outstanding shares increases. However, the value of the company remains the same as the total market capitalization is distributed over a larger number of shares. Therefore, the market price per share adjusts to reflect the bonus issue, but the overall market value does not change.
Effect on Fund Flow:
Issuing bonus shares does not impact the company's fund flow adversely. Since no cash is being distributed to shareholders, there is no outflow of funds from the company. In fact, bonus shares are often seen as a way to reward shareholders without affecting the company's cash reserves.
In conclusion, the statement that paid-up share capital increases with the issue of bonus shares is true. This is because bonus shares are issued out of the company's reserves and result in an increase in the company's equity base without requiring any cash outflow.
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Which of the following statement is true if the company issues bonus s...
Explanation:
- Paid-up share capital increases with the issue of bonus shares: When a company issues bonus shares, it does not receive any additional funds from the shareholders. Instead, it utilizes its retained earnings or capital reserves to issue bonus shares. As a result, the number of shares outstanding increases without any change in the total capital invested in the company. This leads to an increase in the paid-up share capital of the company.
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Which of the following statement is true if the company issues bonus shares?a)Bonus share is an income.b)Total market value comes down after the bonus issue.c)Paid-up share capital increases with the issue of bonus shares.d)Fund flow is affected adversely due to bonus issues.Correct answer is option 'C'. Can you explain this answer?
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Which of the following statement is true if the company issues bonus shares?a)Bonus share is an income.b)Total market value comes down after the bonus issue.c)Paid-up share capital increases with the issue of bonus shares.d)Fund flow is affected adversely due to bonus issues.Correct answer is option 'C'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Which of the following statement is true if the company issues bonus shares?a)Bonus share is an income.b)Total market value comes down after the bonus issue.c)Paid-up share capital increases with the issue of bonus shares.d)Fund flow is affected adversely due to bonus issues.Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following statement is true if the company issues bonus shares?a)Bonus share is an income.b)Total market value comes down after the bonus issue.c)Paid-up share capital increases with the issue of bonus shares.d)Fund flow is affected adversely due to bonus issues.Correct answer is option 'C'. Can you explain this answer?.
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Which of the following statement is true if the company issues bonus shares?a)Bonus share is an income.b)Total market value comes down after the bonus issue.c)Paid-up share capital increases with the issue of bonus shares.d)Fund flow is affected adversely due to bonus issues.Correct answer is option 'C'. Can you explain this answer?, a detailed solution for Which of the following statement is true if the company issues bonus shares?a)Bonus share is an income.b)Total market value comes down after the bonus issue.c)Paid-up share capital increases with the issue of bonus shares.d)Fund flow is affected adversely due to bonus issues.Correct answer is option 'C'. Can you explain this answer? has been provided alongside types of Which of the following statement is true if the company issues bonus shares?a)Bonus share is an income.b)Total market value comes down after the bonus issue.c)Paid-up share capital increases with the issue of bonus shares.d)Fund flow is affected adversely due to bonus issues.Correct answer is option 'C'. Can you explain this answer? theory, EduRev gives you an
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