Bonus shares are additional shares given to existing shareholders without cost based on the number already owned, representing a company's accumulated earnings not paid as dividends. These earnings come from sources like retained profits, reserves, securities premium, and realized capital profits. Issuing bonus shares requires specific prior permission from the RBI. The advantages are increased share marketability and holdings, plus retained profits can fund development. Disadvantages include a decline in EPS and future dividend rates, and potential share speculation.

1. Advance Financial.Magt
Topic – Bonus Shares
NAME:
RAJIV KACHI - 338

2. Introduction
What is meant by Bonus Shares?
 Bonus shares are additional shares given to the current
shareholders without any additional cost, based upon the
number of shares that a shareholder owns.
 These are company's accumulated earnings which are not
given out in the form of dividends, but are converted into
free shares.

3. What can be used for the issue of bonus
shares?
 Balance in the profit and loss account.
 General Reserves or other Reserves created out of the profits.
 Realized Capital profits and reserves.
 Securities Premium account.

4. Legal Requirements
Bonus Shares to existing share holder’s :-
“Specific prior permission from RBI” (Required)

5. Advantages
 Marketability of the Shares Increases
 Increases in Shareholders holdings and increased
investor confidence.
 Retained profits can be used for development and
expansion.

6. Disadvantages
 EPS, MPS Declines
 Rate of dividend in future may reduce.
 It may encourage Speculation in Shares.

7. Thank You !