ACCA Financial Management (F9) Certification Practice Exam

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Prepare for the ACCA Financial Management (F9) Certification Exam with engaging quizzes and interactive content. Dive deep into financial management concepts and boost your exam confidence with questions that come with detailed explanations.

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What does a company's issuance of scrip shares affect?

Company's total assets
Market price of existing shares
Proportionate ownership of existing shareholders
Dividend distribution for preference shares

The correct answer is: Proportionate ownership of existing shareholders

The issuance of scrip shares impacts the proportionate ownership of existing shareholders. When a company issues scrip shares, it typically does so to raise additional capital without diluting existing shareholders' equity, as scrip shares are issued in lieu of cash dividends or as an alternative form of company financing. Since scrip shares effectively increase the number of shares in circulation, existing shareholders receive additional shares but their overall ownership stake in the company remains relatively unchanged in terms of percentage ownership. This means that while the total number of shares they hold increases, it does not reduce their control or claim over the company's assets and earnings. Consequently, while there will be changes in the total number of shares outstanding, the proportional ownership of the existing shareholders stays intact, making option C the correct answer.