Question

In case the company has issued Bonus shares, which among the following ratios will be affected?

A Debt to Equity Correct Answer Incorrect Answer
B Liquidity Ratios Correct Answer Incorrect Answer
C Activity Ratios Correct Answer Incorrect Answer
D A and C Correct Answer Incorrect Answer
E None of the above Correct Answer Incorrect Answer

Solution

In case of Bonus Issue, the overall capital remains the same, because a part of net worth (profits) is decreased and are being transferred to other part of the net worth (pure capital). Therefore, even the Debt Equity ratio will be unaffected.

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