what is the difference between Bonus and stock split in Details 2021

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Hello, friends in this we will learn the detailed concept of BONUS SHARE & STOCK SPLIT with example.

First, we learn WHAT IS THE BONUS SHARE? then we will see WHAT IS THE STOCK SPLIT? and lastly see what is the difference between a bonus and stock split in Details 2021.

WHAT IS THE SHARE SPLIT?

Generally, company Share Split Like these 1:2, 1:5, etc.

Share split 1:2 Means your 1 share will convert into 2 shares. Here 1 share is your original share and after the split, your no. of the share will become 2 shares.

See another example Let’s say any company in the stock market decided to give a Share split 1:5. and I have 1 share in this company. my 1 share will become 5 shares.

Let’s understand through table Share Split 1:5

No. Of sharesShare priceInvestment Value
Before Bonus100Rs.300Rs.30,000
After bonus500Rs.60Rs.30,000

Effects of stock split

1.Make share price affordable.

2.Share split makes generally positive Sentiment.

3.Increase Liquidity and Demand.

Shareholders Equity Before Bonus

Share CapitalRs.10 (Face value) x1 Cr. Share=Rs.10 Cr.
ReserveRs.50 Cr.
Shareholder Equity TotalRs.60 Cr.

Shareholders Equity After Bonus

Share CapitalRs.2 (Face value) x5 Cr. Share=Rs.10 Cr.
ReserveRs.50 Cr.
Shareholder Equity TotalRs.60 Cr.

Reverse Stock Split

The reverse stock split is the opposite of the stock split.

Reverse Stock Split 50:1 means 1 Share for every 50 shares held.

Reverse stock split create Negative sentiment in the market about this company.

Reverse stock split creates to convert penny stock to Reasonable price.

WHAT IS THE BONUS SHARE?

Generally, the company gives bonuses instead of Dividends.

suppose XYZ. the company has good money in reserve surplus. and XYZ company no need this reserve surplus money in the future. so the company thinking to give this money to shareholders in the form of Bonus Shares, Dividends, etc.

The bonus gives like this 1:1 means 1 bonus share for every 1 share held.

The bonus gives like this 1:2 means 1 Bonus share for every 2 shares held.

Note-Always Remember in Bonus share 2nd digit is your original share and 1st digit is Bonus share.

Suppose XYZ Company Gives Bonus 2:1

No of SharesShare PriceInvestment Value
Before Bonus100Rs.300Rs.30,000
After Bonus300Rs.300/3=Rs.100Rs.30,000

So we understand from the above example Before Bonus and After Bonus Share rice will Remain the Same. Only Changes in No pf Share and Share Price.

Effect Of Bonus Share

1.Bonus Gives instead of Dividends.

2.Bonus Share Create Positive Sentiment in the market.

3.Increase Liquidity and Demand.

Share Holders Equity before and after Bonus- Share Bonus 2:1

Share Holders Equity
-Before Bonus
Share CapitalRs.10 Cr. [Rs.10 (face value) x 1 Cr. Shares
ReservesRs.50 Cr.
Total Shareholders EquityRs.60 Cr.
hare Holders Equity
-Before Bonus
Share CapitalRs.30 Cr. [Rs.10 (face value) x 3 Cr. Shares]
ReservesRs.30 Cr.
Total Shareholders EquityRs.60 Cr.

When you will get Bonus and Split share Ex. Date & Record Date.

Announcement Date Company Announces the Bonus/Dividend/Split this Date is Called Announcement Date.

Record Date- is the last date to decide who will get Bonus/Split/Dividend on share.

But in India, There is a T+2 Cycle. It means If you Buy Share on 1 July then on 3 July this share will come in your Name or in your portfolio.

Ex. DateBonus/split/Dividend only get this shareholder who buys share 1 day ago from Ex. Date.

Ex. Bonus means without Bonus

Cum Bonus means with bonus

Announcement DateEx. Bonus DateRecord Date
5 September15 October16 October
Trade Execution Date
Buyer will get Bonus Share5 September-14 October
Seller will get Bonus Share15 October – 16 October

SO I hope after reading this blog you understand All concepts related to Bonus share and stock split. If Further have any doubt then comment inbox I will make a solution for your queries.

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Thanks. Keep Reading Keep Growing.


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