ECONOMICS
FINANCIAL MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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In stock split the face value of the company remained unchanged while in case of bonus share the face value decreases
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In stock bonus the face value of the company remained unchanged while in case of stock split the face value decreases
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In case of stock split the free float of the company increases while in case of bonus share the free float decreases
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In case of stock bonus, the free float of the company increases while in case of share split the free float decreases
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Detailed explanation-1: -Face Value: The face value of a share remains the same in a bonus issue while it changes proportionately in a stock split. Division of Share: A stock split divides a single share into two or more shares according to the split ratio, whereas a bonus issue gives current shareholders an additional share.
Detailed explanation-2: -Both bonuses and stock splits may increase the amount of shares held by investors at any given point in time. However, it is vital to remember that while bonus shares and stock splits increase the number of shares, they also decrease the market price of shares.
Detailed explanation-3: -In a nutshell, the difference between right shares and bonus shares can be concluded as the right share is issued at a lower price than the current market share price whereas bonus share is issued as a reward to the shareholders of the Page 4 company on a specified date ie.
Detailed explanation-4: -In the event of a stock split, the number of shares increases and the face value of each share reduces, thus making it easier for new investors to show interest and invest in the company’s stock. In other words, there can be an increase in the number of shareholders as more investors would buy at lower prices.
Detailed explanation-5: -Stock Dividend is nothing but pro-rata distribution of the own stock of the company to the shareholders. Stock Split implies the process of dividing the existing outstanding shares into a number of smaller shares. The number of shares increases by the percentage of a stock dividend.