1. To conserve the cash resources of the company
2. To present a proper figure of share capital with which profits can be compared
3. To offer capital gain to share holders.
Company issue bonus shares at the following circumstances-
1.when the company has accumulated large reserves,
2, when the company has expended such reserves in revenue producing assets and when it is not in a position to give cash bonus.
3, when there is a wide gap between the share capital and fixed assets. When the company is under capitalized.
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