Which of the following statements about a bonus issue is NOT true?
A) Shareholders will only gain if the market value of the combined shares is greater than it was before the bonus issue.
B) Total shareholders' equity remains constant.
C) Net assets increase.
D) If a shareholder owned 10 per cent of the company before the bonus issue, she or he would still own 10 per cent after the bonus issue.

Question

Quizplus · Accepted Answer

A bonus issue involves the company issuing new shares to existing shareholders for free, based on the number of shares they already own. This action does not increase the company's net assets; it merely redistributes the company's existing equity in the form of more shares, keeping the total shareholders' equity constant. Therefore, the statement that net assets increase is not true.

Which of the Following Statements About a Bonus Issue Is