NISM Certifications · NISM-Series-XV: Research Analyst · Corporate Actions
A company that has accumulated large free reserves issues additional shares to existing shareholders in a fixed ratio without taking any money from them. Which corporate action is this?
This is a bonus issue. The company converts its free reserves into share capital and gives existing shareholders additional shares in a fixed ratio without any payment, unlike a rights issue, which requires shareholders to pay for the new shares.
- ARights issue
- BBonus issueCorrect
- CBuyback of shares
- DPreferential allotment
Explanation
A bonus issue capitalises free reserves and distributes new shares to existing shareholders at no cost. A rights issue requires payment, a buyback reduces shares, and a preferential allotment goes to select investors.
Did you get it right without looking?
One question tells you little. A timed set on Corporate Actions shows your real accuracy, how long you take and where you lose marks.
More Corporate Actions questions
- A company's board announces a stock split reducing the face value of its equity shares from Rs 10 to Rs 2. Which of the following is the dir…
- Kaveri Industries has 10 crore shares outstanding at a market price of ₹250. It plans a buyback of 50 lakh shares through the tender offer r…
- A company declares a cash dividend of ₹5 per share with a record date of Thursday. Under the T+1 settlement cycle, which statement about the…
- On the ex-dividend date of a cash dividend, what is the usual expected effect on the share price, all else being equal?
- Meera holds 500 shares of a company. The board declares a bonus issue in the ratio 3:5 (3 bonus shares for every 5 held). The pre-bonus mark…
- A stock trades cum-rights at Rs 260. The company offers 1 rights share for every 3 held at Rs 140. What is the theoretical ex-rights price (…