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
Question: a) Lucy who plans to retire in 18 years has decided to save money in the bank at the beginning of each month until her retirement, with each subsequent saving incre

Define Meaning of Investment Meaning of Investment: Investment involves making of a sacrifice in the present with hope of deriving future advantages. Investment has many


Five years ago, you bought a house for $151,000, with a down payment of $30,000, which meant you took out a loan for $121,000. Your interest rate was 5.75% fixed. You would like to

From the following information related to XYZ Ltd.; you are required to find out (a) contribution (b) Break-even point in units (c) Margin of safety, (d) Profit             Tota

If Metropolis Healthcare Systems have 1,150,000 in cash. How long will it take them to accumulate 2,000,000 in cash? Assume an interest rate of 5%..

Net Present Value Method - Example Jeremy limited wishes to expand its output by purchasing a new machine worth 170,000 and installation costs are estimated at 40,000/=.  In t

according to given specialization take down an industry and investigate its managerial hierarchy to describe each of one of the managerial work level functioning

Bell is considering two marketing options for the Canadian launch of their internet-based video streaming service in the first quarter of 2012.   i. A  "soft" launch using prima

In order to value a debt security correctly, we must understand the terms and conditions of debt securities precisely. These terms define the contractual rights of the debt securit