Hi Guys,

I have a very basic question - What is the difference between bonus and split? I understand the change in Face Value and all... But how does it make a difference from company's perspective or investor's perspective?

Bonus
Usually companies accumulate it's earnings in reserve funds instead of paying it to share-holders in form of dividend.

This accumulated reserve fund is then converted into share-capital and allotted to share-holders as bonus shares in proportion to their existing holding.

Share-capital of the company increases. Share-holders get bonus shares in compensation of dividend.


Split
In Split company's existing shares are divided into multiple shares.

Although the amount of shares outstanding increases by a specific multiple but the total value of the shares remains the same compared to pre-split amounts, because no real value has been added as a result of the split.

One reason as to why stock splits are performed is that a company's share price has grown so high that for many investors the shares are too expensive to buy in round lots.