NISM Certifications · NISM-Series-XV: Research Analyst · Corporate Actions
A company with 10 crore shares of face value Rs 10 each announces a 1:1 bonus issue. Its shares trade at Rs 400 before the record date. Assuming no other factor, what is the approximate price after the bonus adjustment, and what is the market capitalisation effect?
The price adjusts to about Rs 200 and market capitalisation stays unchanged at Rs 4,000 crore. A 1:1 bonus doubles the number of shares by capitalising reserves, without bringing in cash, so each share's value halves.
- ARs 200; market capitalisation unchangedCorrect
- BRs 200; market capitalisation doubles
- CRs 400; market capitalisation doubles
- DRs 390; market capitalisation falls by Rs 10 per share
Explanation
Shares double from 10 crore to 20 crore, so the price adjusts to 400/2 = Rs 200. Market capitalisation stays 10 crore x 400 = Rs 4,000 crore = 20 crore x 200. Bonus issue capitalises reserves and brings no new value.
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 listed company announces a bonus issue in the ratio 1:4 (one bonus share for every four held). An investor holds 2,000 shares before the r…
- On the ex-dividend date, what generally happens to the share price of a company, all else being equal?
- Shares of Sundaram Textiles Ltd. closed at ₹600 cum-rights. The company offers a rights issue of 1 share for every 4 held at ₹400 per share.…
- A company with 20 crore shares announces a buyback of 2 crore shares at Rs 250 per share through the tender offer route. What is the total b…
- A listed company announces a stock split reducing the face value of its equity shares from Rs 10 to Rs 2 each. Other things being equal, wha…
- A company declares a cash dividend with a record date of Thursday under the T+1 settlement cycle in India. Assuming no holidays, on which da…