The issue of bonus shares ............. the debt-equity ratio of the company.

No change

The correct answer is option 3- No change.

Sometimes, a company issues additional equity shares to the existing equity shareholders in proportion of their existing shareholding in the company without charging any further payment. Such free shares are known as bonus shares. Bonus shares are issued out of reserves and surplus of the company. Hence, because of bonus shares, the reserves and surplus are converted into the share capital of the company. Thus total equity (Total shareholder's funds) remains unchanged and there will be no effect on the debts of the company. So, there will be no change in debt-equity ratio.