Question

What is stock split? Distinguish between a bonus issue and a stock split.

Answer 1

Stock Split Means: it refers to that a company divides its existing share into multiple shares or method of increasing the number of shares in a company without altering the firm's market value.

Basis for Comparison	Stock Split	Bonus issue
Meaning	It referred to as dividing its existing share into multiple without affecting the market value of firms	A bonus share is a free share, issued by the company to its existing shareholder.
Objective	Dividend not paying while distributing the profit	Gain the brand value or market position.
Equity Capital	No change in equity capital	Reserve fund is converted to equity capital
Face value of stock	It is changed	It remain unchanged
Availability	It is available for both existing shareholders and potential investors	It is available only for existing shareholders.
Receipt of cash	It results in cash receipt	Don’t result in cash receipt.