Bonus Issue Of Shares. The companies also issue bonus shares to restructure their. Bonus shares are basically issued:

Because purpose of bonus issue is to increase liquidity, the ratio of new shares issued relative to existing shares in circulation is always much more than share dividend, in the range of 25% or above. Note that despite the bonus issue, there is no change in the earnings per share for the two years as there is no change in earnings. The effect of bonus issue is eliminated by incorporating the bonus shares adjustment in the calculation of weighted average shares for both years.