How is the bonus fraction calculated for a bonus issue?

The bonus fraction is calculated to determine the entitlement of shareholders to new shares based on their existing holdings in a company. In a bonus issue, companies distribute additional shares to existing shareholders without any additional cost, usually in proportion to their existing shareholdings.

The correct method to calculate the bonus fraction is by taking the new number of shares divided by the old number of shares. This reflects how the ownership of the shares is adjusted post-bonus issue. For example, if a company has 100 old shares and issues 50 new shares, the bonus fraction is 150 (the new total) divided by 100 (the old total), effectively giving existing shareholders a clear understanding of how many new shares they receive relative to their old shares.

The other options do not effectively capture this relationship. The first option presents the calculation in reverse, which would not provide the correct entitlement ratio. The third option introduces weighted averages, which are not relevant in a straightforward bonus issue context. Lastly, the fourth option discusses theoretical shares but does not accurately express the concept of entitlement in relation to existing shareholdings. Understanding the calculation of the bonus fraction is crucial for determining the impact of bonus issues on shareholdings and overall equity.