Which of the following statements are true?

The statement regarding a bonus issue is true. A bonus issue involves a company issuing additional shares to its existing shareholders at no extra cost, effectively converting some of the company's reserves into share capital. This action is proportionate to the shareholders' current holdings, meaning that each shareholder receives additional shares based on the number of shares they already own. This process does not raise new funds for the company; rather, it serves to increase the total number of shares in circulation, which can help enhance liquidity in the market for those shares.

Regarding the other statement about a rights issue, it correctly describes a situation where a company offers its existing shareholders the opportunity to purchase additional shares, usually at a discounted price and proportionate to their existing shareholdings. However, this involves a direct request for additional investment from the shareholders, differing fundamentally from a bonus issue which does not require any payment.

Thus, while the first statement stands correct and conveys the nature of a bonus issue accurately, the second statement is also correct in defining a rights issue, leading to the conclusion that the best representation includes both statements as true, but that was not the answer selected in this context. The focus on why a bonus issue is correct sets a clear understanding of that specific term and helps in distinguishing