Firm X has declared a stock dividend that pays one share of stock for every 7 shares owned. After the stock dividend, earnings per share will

Question

Quizplus · Accepted Answer

A stock dividend increases the number of shares outstanding, which dilutes the earnings per share (EPS). Since the dividend is one share for every 7 shares, the number of shares increases by approximately 14.3%, leading to a 14.3% decline in EPS.

Firm X Has Declared a Stock Dividend That Pays One