Which of the following can be reasons for a company to declare a share dividend (bonus issue)?
I. To reduce the market price of their shares.
II. To capitalise the retained earnings of the company.
III. To conserve cash.
IV. To increase the number of shareholders.

Question

Quizplus · Accepted Answer

I. Reducing the market price of shares makes them more affordable, thus potentially broadening the investor base. II. Capitalising retained earnings through a share dividend converts profits that have not been distributed as cash dividends into share capital. III. Issuing a share dividend conserves cash since it rewards shareholders without the company having to expend cash. IV is incorrect because issuing a share dividend to existing shareholders does not directly increase the number of shareholders; it increases the number of shares held by existing shareholders.

Which of the Following Can Be Reasons for a Company