Chapter 4 Flashcards
1
Q
What is a bonus issue?
A
Free shares to current shareholders based upon the shareholders current shareholding
2
Q
What is a rights issue?
A
Issue of shares to current shareholders at a discounted price
3
Q
What is an option or warrant to subscribe for shares?
A
Gives holder right to buy shares at some time in future at predetermined price
4
Q
How do you calculate free shares?
A
No of options x (FV-EV/FV)
FV = fair value of share price
EV = Exercise price of share
5
Q
What happens if convertible bonds have been converted?
A
Interest/dividends saved therefor earnings would be higher
No of shares would increase
