Question

Issue of bonus shares out of reserves will result in __________.

• A. increase in working capital
• B. decrease in working capital
• C. no change in the working capital
• D. none of these

Answer 1

Answer: (C)

no change in the working capital

Bonus shares are issued by the company to the existing shareholders out of the profits or from the available reserves and surpluses.

Issue of Bonus shares does not involve any cash movement, hence there will be no change in the working capital of the company.