The Bonus Shares Ratio Calculator is a tool that helps investors and analysts determine the proportion of bonus shares issued by a company. Companies issue bonus shares to reward existing shareholders, and understanding the bonus ratio is essential for making informed investment decisions.
Formula
The formula used to calculate the bonus shares ratio is:
R = (T / O) − 1
Where:
- R = Bonus Shares Ratio
- T = Total Shares after the bonus issuance
- O = Original Shares before the bonus issuance
How to Use
- Enter Total Shares (T): Input the total number of shares after the bonus shares have been issued.
- Enter Original Shares (O): Enter the number of shares before the bonus issue.
- Click “Calculate”: The bonus share ratio will be displayed in the result box.
Example
If a company had:
- Original Shares (O) = 1,000
- Total Shares (T) after bonus = 1,500
Then, the bonus share ratio is:
R = (1,500 / 1,000) – 1 = 0.5 (or 50%)
This means shareholders receive 1 bonus share for every 2 shares they already own.
FAQs
- What is a bonus shares ratio?
- The bonus shares ratio is the proportion of new shares issued as bonus shares compared to the original shares.
- How do companies decide the bonus ratio?
- Companies determine the bonus ratio based on their retained earnings, financial performance, and shareholder policies.
- Why do companies issue bonus shares?
- Companies issue bonus shares to reward shareholders, increase liquidity, and make the stock more affordable.
- Does receiving bonus shares increase my investment value?
- No, the total value remains the same because the stock price usually adjusts accordingly.
- Can the bonus share ratio be greater than 1?
- Yes, if the number of bonus shares issued exceeds the original shares, the ratio can be greater than 1.
- How does a 1:1 bonus share ratio work?
- A 1:1 ratio means you receive one bonus share for each share you already own.
- Is a bonus issue the same as a stock split?
- No, a stock split increases the number of shares by reducing the price per share, while bonus shares are issued from reserves.
- Do bonus shares dilute ownership?
- No, all shareholders receive bonus shares in proportion, so ownership percentage remains unchanged.
- Are bonus shares taxable?
- Bonus shares are generally not taxed at the time of issuance but may be taxed when sold.
- Where can I find a company’s bonus share announcement?
- Companies announce bonus issues through stock exchanges, investor reports, and press releases.
- How does the bonus shares ratio affect share price?
- The share price usually decreases proportionally to maintain the overall market capitalization.
- Can I sell my bonus shares immediately?
- Yes, bonus shares can be sold like regular shares once they are credited to your account.
- Do all shareholders receive bonus shares?
- Yes, bonus shares are issued to all eligible shareholders based on the record date.
- What happens if I own fractional shares during a bonus issue?
- Some companies round off fractional shares, while others compensate with cash.
- Can I use this calculator for preference shares?
- No, this calculator is for equity shares, not preference shares.
- Does issuing bonus shares affect dividends?
- Yes, since the number of shares increases, per-share dividend payments may decrease.
- How does a bonus issue impact EPS (Earnings Per Share)?
- EPS usually decreases because earnings are distributed over a larger number of shares.
- Can a company issue bonus shares multiple times?
- Yes, companies can issue bonus shares multiple times based on their financial strength.
- Is it better to receive bonus shares or cash dividends?
- It depends on your investment goals. Bonus shares increase holdings, while dividends provide immediate cash.
- How often do companies issue bonus shares?
- There is no fixed frequency; it depends on the company’s financial health and policies.
Conclusion
The Bonus Shares Ratio Calculator is a simple yet powerful tool to determine the impact of bonus share issuance. By understanding the ratio, investors can assess how their shareholding changes and make informed decisions about their portfolios.