|
It is human nature to want more. The best example of this behavior through mans want for money. He is always looking for ways through which he can create wealth and make it grow in order to reap higher margins of profit. The best way to do this is by investing. You can choose to invest in assets like real estate and receive monthly payments, in the form of rent. Although this is a great investment option, it requires a huge amount of funds thus, limiting the number of people who can opt for this investment. A more popular choice is to invest in the capital market. Here organizations buy and sell financial securities in order to raise funds. This is beneficial to both the investor and the organization. Through the capital market, private and public companies are able to generate funds, in order to go about their business activities. Companies that are well funded tend to have access to top of the line technologies, thus allowing them to grow at a rapid pace. Shareholders are then provided with a certain percentage of the earnings of the company, thus allowing their capital to grow. If a company has experienced and exceptionally good amount of profit, they are faced with two options. They can either distribute additional shares among the existing share-holders or they can increase the amount to be paid as dividend. Bonus share announcements are made by the organization when they do not wish to increase the increase the pay-out per share. However it does not stop there. There are different types of bonus shares, let us take a closer look at the options available: 1. Gain Sharing This is mainly used in manufacturing and works as a reward system for the employees. Under this system bonus shares are offered for improvements made to the manufacturing process and an increase in the quality of production. 2. Profit Sharing This is when profits of the company are distributed in the form of additional shares to existing shareholders. It is a very basic method in which profits are distributed and it is usually announced in the annual report of a company. 3. Spot Bonus Reward This is a means through which employees are rewarded for extraordinary contributions made to the organizations. Here they are offered shares on the spot and this is meant to motivate them to work harder in the long run. 4. Sign-on Bonus Many a times it is difficult to find an employee, who is the perfect fit in the organizational structure. Hence, companies encourage existing employees to recommend people to fill vacancies. In order to reward the efforts taken, shares are offered if the recommended person is hired. A shareholder is an owner of the company. Hence any additional shares are always appreciated. Bonus-shares go a long way to help create loyal employees and shareholders alike.
Related Articles -
bonus shares, bonus announcement, date of bonus announcement,
| 
