Bizblog term of the week: Bonus Issue

   Bonus Issue also known as ''Scrip or Capitalization issue'' is an issue of free additional shares to existing shareholders in proportion to their current shareholding in the company.With bonus issue, the total number of shares held by shareholders increases.

  For example, if Investor A holds 400 shares of a company and such company declares 3:1 bonus,(i.e for every one share, he gets 3 shares for free). That is total of 1200 shares for free and his total holding will increase to 1600 shares.

  Bonus issue increases the total number of shares issued and owned, it does not change the value of the company but changes the structure of the company's shareholders' equity