A bonus is when a company gives extra shares to its current shareholders for free. These bonus shares are given out based on the number of shares you already own.
Key Points about Bonus Shares:
- Free Shares: You get these shares without paying anything extra.
- Specific Ratio: They're given in a set ratio, like 1:2, meaning you get 1 bonus share for every 2 shares you own.
- No Change in Investment Value: Your total investment value stays the same, but you have more shares, and the share price adjusts.
- Purpose: Companies announce bonuses to reward shareholders and increase market liquidity.