CISI Professional Practice Exam 2025 – Complete Prep Guide

Question: 1 / 400

If a company makes a bonus issue on a 4:5 basis, what will existing shareholders receive?

1 share for every 5 that they own

2 shares for every 5 that they own

4 shares for every 5 that they own

In a bonus issue on a 4:5 basis, it means that for every 5 shares that an existing shareholder holds, they will receive 4 additional shares. This type of corporate action is often used to increase the number of shares in circulation while maintaining the overall value of the company.

Shareholders benefit from bonus shares because they effectively increase their total number of shares without having to invest any additional capital. The shareholding percentage remains unchanged, as it is simply a redistribution of retained earnings into share capital.

Understanding the mechanics of this bonus issue helps clarify why existing shareholders receive 4 shares for every 5 that they own in this specific scenario.

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5 shares for every 4 that they own

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