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For this example on bonus issue, can I ask how to get the bonus fraction of 9/7?
Also, please help me correct my understanding, from my interpretation of the question, given that there is 2 bonus issues during the year, shouldn’t there be 2 different bonus fractions for each period?
so my working was like this:
the bonus fraction for 1 March 2008 to 31 August 2008 would be 5000000/2000000= 5/2
the bonus fraction for 1 Sept to 30 October would be 6428571/5000000
And from 1 November onwards there will be no bonus fraction, this part I understand.
So my question is, how can I calculate 9/7 as my bonus fraction and why was this used consecutively for the 2 different periods instead of my workings above?
Thank you.
“can I ask how to get the bonus fraction of 9/7”
To quote from page 121, the bonus fraction is calculated as:
number of shares in issue AFTER the bonus issue divided by
number of shares in issue BEFORE the bonus(Have you read the notes?)
You start with 7 shares and there’s a bonus issue of 2 for 7
So how many do you have now?
Where have you got this from????
“given that there is 2 bonus issues during the year, shouldn’t there be 2 different bonus fractions for each period?”
Please …. look again at the question AFTER you’ve looked again at page 120, third bullet point, “issues at full market price”
(I see the word “bonus” only once in the question!)
“….and why was this used consecutively for the 2 different periods instead of my workings above?” – very simply, because your workings above are completely wrong!
Hi, I have managed to calculate the bonus fraction, realized where I gone wrong with this part.
I have read the third bullet point but I still don’t quite understand what it means, can you help to explain it in a simpler explanation?
Thank you.
It means that, when we have an issue at full market price, it’s not a bonus issue nor a rights issue. It’s an issue of new shares in exchange for which the company receives the full market price of those shares in cash (or equivalent)
NO fraction is applied to prior periods when we have an issue at full market price.
But if there’s a bonus or rights issue afterwards, then the fraction is applied to ALL prior periods before the bonus or rights issue
Better?
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