Wednesday, December 28, 2011

Difference between stock split and bonus?

Recently a question was posted to explain the Difference between stock split and bonus
Since its a Topic which everybody should understand,I am giving a detailed analysis on the subject.
First before Giving Any Difference lets know the Similarity.

Assume a Share is trading at Rs 100 and it issues 1 bonus Share for every one share held or it spilts the stock in two.Theoretically it will trade at Rs 50 after bonus or Split.practically it may trade at Rs 40 or Rs 60Depending on market conditions in Both Cases no of Shares will Double and net worth will remain the Same.

A bonus is a free additional share that is given to you without changing any face value. A stock split is the same share split into think like this you have 100 rs and then you are taken that 100 rs and given 2 Fifty Rupees , you might have 2 counts now but the worth is same as 100 rs , but in case of Bonus you are given a extra 100rs .

In a stock split, the number of shares increases but the face value drops. The face value never changes for a bonus shares.