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What is bonus?

A bonus issue is a stock dividend allotted by a company to reward its shareholders. These are free shares its shareholders receive against the shares they might be holding. These allotments typically come in fixed ratios such as 1:1, 2:1, 3:1, and so on. 

A ratio of 1:1 means all existing shareholders get 1 additional share for every share they hold, at no extra cost. Similarly, a ratio of 2:1 means all existing shareholders get 2 additional shares for every share they hold, at no extra cost.

Please watch the explainer video below for better understanding:
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