Question

What is the difference between bonus share and right issue? ​

Answer 1

Answer:

difference between bonus share and right issue:-

1-Rights shares are offered to the existing shareholders by the company for raising additional capital from the market. This has to be done within a stipulated time period. On the other hand, bonus shares are given to the shareholders out of the free reserves created from additional profits made by the company during the year.

2-The objective of the rights issue is to insert additional capital in the company as compared to bonus shares which aim to increase active trading through an increase in a number of outstanding shares.

3-Rights shares are offered at a discounted price compared to the market price. Bonus shares are issued to the shareholders free of cost.

4-Rights shares are either partly paid or fully paid-up depending on the proportion of the paid-up value of equity shares when the further issue takes place. On the other hand, bonus shares are always fully paid up.

5-Rights issue permits the renunciation of rights which have been issued either partially or completely, though no such option is available for bonus shares.