The Effect of a Bonus Issue on the Market Value

question 70

Multiple Choice

The effect of a bonus issue on the market value of an entity's equity is:

• A) The number of shares is increased, meaning that each shareholder benefits from the conversion of retained earnings into additional shares. Each shareholder benefits proportionately equally, however, so their relative positions remain the same.
• B) The total equity of the entity remains the same, apart from the reclassification of reserves used to make the bonus issue. Each shareholder benefits from the ability to sell off the additional shares provided, so the market value of the entity remains the same.
• C) The market price is observed to drop as a result of the increased supply of shares for sale because shareholders often respond to a bonus issue by selling off the 'windfall' shares.
• D) Theoretically it should have no effect, but empirical evidence suggests that a bonus issue is used to signal an increase in dividends, so the total market value of the entity does sometimes increase.

Evaluate effective treatment approaches for individuals with substance addiction and antisocial tendencies.

Recognize the physical and psychological signs of heroin addiction and withdrawal symptoms.

Prioritize patient care tasks for individuals who have overdosed on specific substances, including methamphetamine.

Identify types of crises and appropriate intervention strategies.

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Definitions:

Inflation

The elevation in the market price of general goods and services, decreasing the value of currency in purchases.

Economic Well-being

A measure of how individuals or societies prosper economically, factoring in income, employment, and access to goods and services.

GDP

Gross Domestic Product, which is the total market value of all final goods and services produced within a country in a specific period.

Real GDP

Gross Domestic Product adjusted for inflation, providing a more accurate measure of economic growth by reflecting the value of all goods and services produced at constant prices.