The Most Important Difference Between a Bonus Share Issue and a Rights

question 48

Multiple Choice

The most important difference between a bonus share issue and a rights issue, from the issuing company's point of view, is that they:

• A) have different effects on cash flow.
• B) require different accounting practices.
• C) benefit different groups.
• D) none of the above

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Definitions:

Contribution Margin

The differential between sales and variable costs, indicative of a product's profitability before fixed costs are subtracted.

Variable Costs

Expenses that change in proportion to the activity of a business, such as costs for raw materials or production expenses, in contrast to fixed costs.

Fixed Manufacturing Cost

Expenses that do not change with the level of production, such as rent for factory premises, salaries for permanent staff, and depreciation of equipment.

Manufacturing Overhead Cost

Expenses related to the production process that are not directly tied to a specific product, including utilities, depreciation, and salaries for production supervisors.