Which of the following statements about bonus issues is NOT true?
A) Bonus issues can be a useful takeover defence.
B) Bonus issues reduce shareholders' equity as well as assets.
C) Bonus issues do not affect cash.
D) Bonus issues are also referred to as share dividends.

Question

Quizplus · Accepted Answer

Bonus issues do not reduce shareholders' equity or assets, in fact, they increase the number of shares outstanding without increasing the company's liabilities or assets. Option A is true, as bonus issues can make it more expensive for a potential acquirer to take over the company. Option C is also true, as bonus issues do not involve any cash flow, and option D is partly true, as bonus issues are similar to stock dividends, but not referred to as share dividends.

Which of the Following Statements About Bonus Issues Is NOT