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A bonus shareis a free share of stockgiven to current shareholdersin a company, based upon the

number of shares that the shareholder already owns. While the issue of bonus shares increases the

total number of shares issued and owned, it does not change the value of the company. Although the

total number ofissued sharesincreases, the ratio of number of shares held by each shareholder

remains constant.

[edit]Explanation

Whenever a company announces a bonus issue, it also announces a book closure datewhich is a

date on which the company will ideally temporarily close its books for fresh transfers of stock.

An issue of bonus shares is referred to as a bonus issue. epending upon theconstitutional

documentsof the company, only certainclasses of sharesmay be entitled to bonus issues, or may be

entitled to bonus issues in preference to other classes. !onus shares are distributed in a fixed ratio to

the shareholders.

"ometimes a company will change the number of shares in issue by capitali#ing its reserve. $n other

words, it can convert the right of the shareholders because each individual will hold the same

proportion of the outstanding shares as before.

A bonus share issue is not adividend. Although these shares are %distributed% from a company to its

shareholders, this is almost never a %distribution% in the corporate law sense. &hat is because they

represent no economic event ' no wealth changes hands. &he current shareholders simply receive

new shares, for free, and in proportion to their previous share in the company. &herefore, a bonus

share issue is very similar to a stock split. &he only practical difference is that a bonus issue creates a

change in the structure of the company(sshareholders( e)uity*inaccounting+. Another difference

between a bonus issue and a stock split is that while a stock split usually also splits the

company(s authori#ed share capital,the distribution of bonus shares only changes its issued share

capital*or even only its outstanding shares+.

This economicsor finance-related article is a stub. You can help Wikipedia by expanding it.

Definition of 'Stock Split'A corporate action in which a company's existing shares are divided into multiple shares.Although the number of shares outstanding increases by a specific multiple, the total dollarvalue of the shares remains the same compared to pre-split amounts, because no real valuehas been added as a result of the split.

In the U.K., a stoc split is referred to as a !scrip issue!, !bonus issue!, !capitali"ation issue!

or !free issue!.

explain 'Stock Split'#or example, in a $-for-% split, each stocholder receives an additional share for each share

he or she holds.

&ne reason as to why stoc splits are performed is that a company's share price has grown so

high that to many investors, the shares are too expensive to buy in round lots.

#or example, if a () *orp.'s shares were worth +%, each, investors would need to

purchase +%, in order to own % shares. If each share was worth +%, investor

http://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Stockholderhttp://en.wikipedia.org/wiki/Company_(law)http://en.wikipedia.org/wiki/Issued_share_capitalhttp://en.wikipedia.org/wiki/Issued_share_capitalhttp://en.wikipedia.org/wiki/Issued_share_capitalhttp://en.wikipedia.org/w/index.php?title=Bonus_share&action=edit&section=1http://en.wikipedia.org/wiki/Book_closurehttp://en.wikipedia.org/wiki/Constitutional_documentshttp://en.wikipedia.org/wiki/Constitutional_documentshttp://en.wikipedia.org/wiki/Constitutional_documentshttp://en.wikipedia.org/w/index.php?title=Share_class&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Share_class&action=edit&redlink=1http://en.wikipedia.org/wiki/Dividendhttp://en.wikipedia.org/wiki/Dividendhttp://en.wikipedia.org/wiki/Stock_splithttp://en.wikipedia.org/wiki/Shareholders'_equityhttp://en.wikipedia.org/wiki/Shareholders'_equityhttp://en.wikipedia.org/wiki/Accountinghttp://en.wikipedia.org/wiki/Accountinghttp://en.wikipedia.org/wiki/Authorized_share_capitalhttp://en.wikipedia.org/wiki/Authorized_share_capitalhttp://en.wikipedia.org/wiki/Issued_share_capitalhttp://en.wikipedia.org/wiki/Issued_share_capitalhttp://en.wikipedia.org/wiki/Outstanding_shareshttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Financehttp://en.wikipedia.org/wiki/Wikipedia:Stubhttp://en.wikipedia.org/w/index.php?title=Bonus_share&action=edithttp://en.wikipedia.org/wiki/File:ThreeCoins.svghttp://en.wikipedia.org/wiki/Stockholderhttp://en.wikipedia.org/wiki/Company_(law)http://en.wikipedia.org/wiki/Issued_share_capitalhttp://en.wikipedia.org/w/index.php?title=Bonus_share&action=edit&section=1http://en.wikipedia.org/wiki/Book_closurehttp://en.wikipedia.org/wiki/Constitutional_documentshttp://en.wikipedia.org/wiki/Constitutional_documentshttp://en.wikipedia.org/w/index.php?title=Share_class&action=edit&redlink=1http://en.wikipedia.org/wiki/Dividendhttp://en.wikipedia.org/wiki/Stock_splithttp://en.wikipedia.org/wiki/Shareholders'_equityhttp://en.wikipedia.org/wiki/Accountinghttp://en.wikipedia.org/wiki/Authorized_share_capitalhttp://en.wikipedia.org/wiki/Issued_share_capitalhttp://en.wikipedia.org/wiki/Issued_share_capitalhttp://en.wikipedia.org/wiki/Outstanding_shareshttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Financehttp://en.wikipedia.org/wiki/Wikipedia:Stubhttp://en.wikipedia.org/w/index.php?title=Bonus_share&action=edithttp://en.wikipedia.org/wiki/Stock

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would only need to pay +%, to own % shares.

Definition of 'Private Placement'

he sale of securities to a relatively small number of select investors as a way of raising

capital. Investors involved in private placements are usually large bans, mutual funds,insurance companies and pension funds. rivate placement is the opposite of a public issue,in which securities are made available for sale on the open maret.

explains 'Private Placement'/ince a private placement is offered to a few, select individuals, the placement does not have

to be registered with the /ecurities and 0xchange *ommission. In many cases, detailed

financial information is not disclosed and a the need for a prospectus is waived. #inally, since

the placements are private rather than public, the average investor is only made aware of the

placement after it has occurred.

GUIDELINES FOR PREFERENTIAL ISSUES

13.0&he preferential issue of e)uity shares -ully onvertible ebentures*-s+ /artly onvertible ebentures */s+ or any other financial instrumentswhich would be converted into or exchanged with e)uity shares at a later date, bylisted companies whose e)uity share capital is listed on any stock exchange, toany select group of persons under section 01*1A+ of the ompanies Act 1234 onprivate placement basis shall be governed by these guidelines.

13.1"uch preferential issues by listed companies by way of e)uity shares -ullyonvertible ebentures *-s+ /artly onvertible ebentures */s+ or anyother financial instruments which would be converted into exchanged with e)uity

shares at a later date, shall be made in accordance with the pricing provisionsmentioned below5

13.1.1 Pricing o !he issue

16.1.1.1&he issue of shares on a preferential basis can be made at a price notless than the higher of the following5

i+ &he average of the weekly high and low of the closing prices of the relatedshares )uoted on the stock exchange during the six months preceding therelevant date7

89

ii+ &he average of the weekly high and low of the closing prices of the relatedshares )uoted on a stock exchange during the two weeks preceding the relevantdate.

Definition of 'Absorption Costing'A managerial accounting cost method of expensing all costs associated with manufacturing a

particular product. Absorption costing uses the total direct costs and overhead costs

associated with manufacturing a product as the cost base. 1enerally accepted accounting

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principles 21AA3 re4uire absorption costing for external reporting.Absorption costing is also nown as !full absorption costing!.

explains 'Absorption Costing'/ome of the direct costs associated with manufacturing a product include wages for

worers physically manufacturing a product, the raw materials used in producing a product,

and all of the overhead costs, such as all utility costs, used in producing a good.

Absorption costing includes anything that is a direct cost in producing a good as the cost

base. his is contrasted with variable costing, in which fixed manufacturing costs are not

absorbed by the product. Advocates promote absorption costing because fixed manufacturing

costs provide future benefits

Definition of 'Direct Cost'

A price that can be completely attributed to the production of specific goods or services. 5irect costs refer to materials, labospecific product, and therefore are considered indirect costs.

Investopedia explains 'Direct Cost'

#or example, the cost of meat in a hamburger can be attributed directly to the cost of manufacturing that product, as could t

such as the hamburger manufacturer's legal fees and staffing, is anything that is not a direct cost.

Definition of 'Working Capital'A measure of both a company's efficiency and its short-term financial health. he woringcapital ratio is calculated as6

ositive woring capital means that the company is able to pay off its short-