What is the formula for calculating the Bonus Fraction for a bonus issue?

The formula for calculating the Bonus Fraction for a bonus issue is accurately represented by the ratio of the number of shares outstanding after the issue to the number of shares outstanding before the bonus issue. This ratio reflects the increase in the total number of shares as a result of the bonus issue, allowing shareholders to understand the dilution effect on their ownership stake.

When a company issues bonus shares, it does so by converting a part of its reserves or profits into additional equity shares. Therefore, the number of shares increases, and the Bonus Fraction displays how many total shares each shareholder will hold after the new shares are issued relative to what they held before the issuance. This is crucial for shareholders to assess their ownership and the overall valuation of their shareholdings.

For instance, if a company had 1,000 shares before a bonus issue and then issued an additional 200 shares, the total shares after the issue would be 1,200. The Bonus Fraction would be calculated as 1,200 (shares after) divided by 1,000 (shares before), providing a clear picture of the proportional change in ownership that occurs due to the new issuance of shares. Understanding this calculation is essential for wealth management professionals as it aids in evaluating shareholding dynamics post-issu