Advantages of bonus matter, Finance Basics

Advantages of Bonus Matter

a) Tax advantages       

Shareholders can sell new shares, and create cash in form of capital gains such is tax exempt unlike cash dividends which attract 5 percent withholding tax such is final

b) Indication of high profits in future:

A Bonus matter, in an inefficient market conveys significant information to the future of the company.It is declared whenever management expects increase in earning about offset additional outstanding shares so hence E.P.S is not diluted.

c) Conservation of cash

Bonus matter conserves cash particularly if the firm is in liquidity problems.

d) Increase in future dividends

If a firm follows a fixed/constant D.P.S policy, so then net future dividend would rise because of increase in number of shares after bonus matter.

Journal entry in case of bonus matter

                            Dr. R. Earnings (par value)

                            Cr. Ordinary share capital (par value)

NB: A firm can make a script matter also whereas bonus shares are directly from capital reserve.

Posted Date: 1/31/2013 2:42:41 AM | Location : United States







Related Discussions:- Advantages of bonus matter, Assignment Help, Ask Question on Advantages of bonus matter, Get Answer, Expert's Help, Advantages of bonus matter Discussions

Write discussion on Advantages of bonus matter
Your posts are moderated
Related Questions
What is a Treasury bill? How risky is it? Treasury bills are short-term debt instruments granted by the U.S. Treasury which are sold at a discount and pay face value at maturit

Constant payout ratio 1. This is whereas the firm will pay a fixed dividend rate as like 40 percent of earnings. The DPS would consequently fluctuate as the earnings per share

what is the financial position of the company in term of leverage, liquidity and fluidity? Were the position better in 2013 compared to 2012 ? Possible ratios : - Levera

Mr. and Mrs. smith are considering the purchase of a house. They can afford to make  a mortgage payment of $750 per month. If the current mortgage interest rate is 9% with monthly

Please describe the effect of financial leverage on a cost of equity and firm's equity beta.

Describe how society's interests can influence financial managers. Occasionally the interests of a business firm's owners are not similar as the interests of society.  For exam

Problem: Cash Flow Analysis For the attached Gantt chart, the following information is available: Invoices are sent at the end of each month. Mark up is 20% on each invoi

a bond that has a 1000 per value and a contract or coupon interest rate of 12.8%. The bond is selling for a price of $1125 and will mature in 10 years. The firm''s tax rate is 34%

Term Structure of Interest Rates The term structure of interest rate give details the relationship between the term to maturity and interest rates and the differences between

(a) A couple has just celebrated their 25th wedding anniversary. What is the probability of them celebrating their 50th wedding anniversary, if the husband is aged exactly 50, his