Stock dividends and stock splits are similar in all of the following ways except:
A) they both involve a pro rata distribution of shares to existing stockholders.
B) they both reduce the stock price.
C) they both decrease Retained Earnings.
D) have no effect on cash.

Question

Quizplus · Accepted Answer

Stock dividends and stock splits both involve a pro rata distribution of shares to existing stockholders and have no effect on cash. Additionally, they both can potentially reduce the stock price. However, stock splits do not decrease Retained Earnings, as it simply increases the number of shares outstanding but does not affect the overall value of the company. On the other hand, stock dividends do decrease Retained Earnings as they involve the distribution of a portion of the company's earnings to shareholders in the form of additional shares.

Stock Dividends and Stock Splits Are Similar in All of the Following