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What are the disadvantages of issuing bonus shares?

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Question ajoutée par Saeed Ur Rehman , Senior Manager Audit & Advisory , Afrasiab Tanveer & Co Chartered Accountants
Date de publication: 2016/08/31
kamran khalid
par kamran khalid , Accountant , Callguard Security Services

Bonus Share means decrease market value per share.

Frank Mwansa
par Frank Mwansa , ACCOUNTING LECTURER , FREELANCER

Thanks for invitation 

Bonus shares are issued by companies in lieu of paying a cash dividend.

Advantages.

1. The investor doesn't need to pay tax when receiving the bonus shares

2.It is specifically beneficial for investors  who believe in the long story of the company.

3.issuing additional shares and using cash for the business growth of the company increases the investors belief in operations of the company.

3. If the company starts paying the cash dividend in the future the investors receives more because he holds a number of shares in the company.

Al Jun Solomon
par Al Jun Solomon , Accounts cum Audit Staff , Petrolier Corporation

Issuing bonus shares will result to the increase number of outstanding share capital which consequently will dilute the company's market price per share capital.

Tomasz L
par Tomasz L , Reporting Specialist , Outworking

Increase in the number of shares reduces the price per share. It will encourage speculative dealings in the company’s shares. Furthermore the rate of dividend in future will decline and may confuse investors.

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