Bonus Adjustment Results Calculator

Bonus shares, also known as scrip dividends, are additional shares distributed to existing shareholders by a company. This distribution is often done as a gesture of goodwill and to reward shareholders for their loyalty. However, when bonus shares are issued, it can affect the market price of the company’s shares. 

In this blog post, we will explore the concept of bonus adjustment, how it impacts the market price of shares, and provide you with a Bonus Adjustment Results Calculator Tool to simplify calculations. Additionally, we will answer frequently asked questions to enhance your understanding of this financial aspect.

Understanding Bonus Adjustment

When a company issues bonus shares, it essentially increases the total number of shares outstanding without changing the underlying value of the company. This means that the total market capitalization of the company remains the same, but the number of shares has increased. Consequently, the market price of each share is adjusted to reflect this change.

The formula for bonus adjustment is as follows:

Market Price after Bonus Adjustment = Market Price before Bonus / (1 + (Bonus Percentage / 100))

In this formula:

• Market Price before Bonus represents the share price before the bonus issue.
• Bonus Percentage is the percentage of bonus shares issued.

Using the Bonus Adjustment Results Calculator Tool

To make bonus adjustment calculations easier, we’ve developed the Bonus Adjustment Results Calculator Tool. Here’s how to use it effectively:

Step 1: Enter Market Price (Before Book Closure)

• In the “Market Price (Before Book Closure)” field, enter the market price of the company’s shares before the bonus issue.

Step 2: Enter % of Bonus Share

• In the “% of Bonus Share” field, input the percentage of bonus shares being distributed by the company.

Step 3: Click “Calculate”

• Click the “Calculate” button to let the tool perform the bonus adjustment calculation.

Step 4: View the Result

• The tool will display the “Market Price after Bonus Adjustment,” which represents the expected market price of the shares after the bonus issue.

FAQs About Bonus Adjustment

Let’s address some frequently asked questions about bonus adjustment:

1. Why do companies issue bonus shares?

• Companies issue bonus shares to reward existing shareholders, improve liquidity in the stock, and make shares more affordable to retail investors.

2. How does bonus adjustment affect shareholders?

• Bonus adjustment does not impact the total value of a shareholder’s investment. It merely redistributes the value among a larger number of shares.

3. Can the market price after bonus adjustment be lower than the price before the bonus issue?

• Yes, it’s possible. If the bonus issue is substantial, the market price after adjustment may be lower because the total value remains the same, but there are more shares.

4. Is bonus adjustment the same as stock split or stock dividend?

• No, they are different concepts. Bonus adjustment deals with the impact of bonus shares, while a stock split increases the number of shares but reduces the share price proportionally.

5. How does the market typically react to bonus announcements?

• The market often views bonus announcements positively as they indicate the company’s financial health and willingness to reward shareholders.