Pronunciation: [bˈə͡ʊnəs ˈɪʃuː] (IPA) 
The word "bonus issue" is spelled /ˈbəʊnəs ˈɪʃuː/. The first syllable "bon" is pronounced with the vowel sound /ɒ/ as in "not", followed by the consonant sound /n/. The second syllable "us" is pronounced with the vowel sound /ə/ as in "a", followed by the consonant sound /s/. The final syllable "issue" is pronounced with the vowel sound /ɪ/ as in "sit", followed by the consonant sounds /ʃ/ as in "shut" and /uː/ as in "too".
A bonus issue, also known as a scrip issue or a capitalization issue, refers to a corporate action taken by a company to issue additional shares to its existing shareholders without requesting any payment in return. This means that these additional shares are distributed to the current shareholders, in proportion to their existing holdings, as a "bonus" or reward.
The purpose of a bonus issue is to increase the number of outstanding shares available to the shareholders and to capitalize the company's earnings or reserves. This action does not involve any change in the financial status or cash flow of the company and does not create any monetary benefits for the shareholders in the immediate term. However, it can potentially enhance the market liquidity of the company's shares and make them more affordable for investors.
The bonus issue is usually executed by converting a portion of the company's retained earnings, reserves, or surplus into new shares. It is often seen as a way for companies to demonstrate their financial strength and confidence in their prospects to shareholders, while also boosting the company's capital base.
Contrary to a cash dividend, which distributes profits to shareholders in the form of cash payments, a bonus issue distributes additional shares as a form of dividend. These additional shares can be either sold in the stock market by the shareholders or held for potential future gains. Additionally, a bonus issue has the potential to increase the dividend yield for shareholders if the company maintains its dividend payout ratio.
The word "bonus issue" originates from English and comes from the Latin word "bonus", which means "good" or "benefit".
In finance and business contexts, a "bonus issue" refers to a practice where a company distributes additional shares of stock to its existing shareholders without any charge or cost. This action is usually taken by a company when it wants to reward its existing shareholders, increase market liquidity, or adjust the market price of its shares.
The term "bonus issue" combines "bonus", meaning something extra or additional, with "issue", which refers to the act of releasing or distributing shares. The word "issue" has its roots in Middle English and Old French, ultimately derived from the Latin word "exire", roughly translating to "to go out". Therefore, "bonus issue" can be understood to imply the distribution of additional shares as an advantageous or beneficial action for shareholders.
