Multiple choice

The shares issued to existing shareholders when reserves are capitalised are:

  1. Right issue

  2. Bonus shares

  3. Preference shares

  4. All of these

Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When a company capitalizes its reserves (like share premium, retained earnings), it issues FREE shares to existing shareholders in proportion to their existing holdings. These are called BONUS shares. Unlike rights shares which require payment, bonus shares are issued without additional cost.