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Corporate Action
June 07 , 2012

Corporate Actions refer to events that affect the structure of capital or owned funds of the Company. There are four types of Corporate Actions:

  1. Dividend: where the company pays back a part of its profits to its shareholders. To that extent, the share price falls, as the cash moves out of the company balance sheet
  2. Split: where a single share is broken up into two or more shares. For example, if a Rs.100 share is broken into two shares, each share becomes worth Rs.50. Instead of holding a single share worth Rs.100, every shareholder then has two shares worth Rs.50 each
  3. Bonus: where one or more shares are given to each shareholder for each share they hold. This is very similar to split, in that the value of each share falls to that extent
  4. Buyback: where the company buys back some shares from its shareholders and extinguishes them. In such a case, there are fewer shares of the company out in the market thereafter

These corporate actions are important to note while calculating taxes and returns, since share prices change when these events happen (though returns do not).

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