The Board of Directors of the Theater Visions Corporation Is

The board of directors of the Theater Visions Corporation is trying to establish the dividends policy for 2016 for the company. The board has asked you, the vice president of finance, to attend the meeting in order to get your input. You were asked to discuss and evaluate stock dividends from the perspective of 1) the stockholders, and 2) the issuing corporation's viewpoint.
Required:
a. Discuss the disadvantages associated with stock dividends from the stockholder's perspective.
a. From a stockholder's perspective, there are various disadvantages associated with stock dividends. First, the stockholder does not receive any of the corporation's assets. Another disadvantage is that the stockholder's percentage of ownership does not change as a result of the dividend. In addition, theoretically, the total market value of the stockholder's investment will not increase because the increased number of shares will be offset by the decrease
in the market price per share. Another shortcoming is that the earnings per share will decrease because of the increase in the number of shares. Finally, future dividends may be limited due to the decrease in retained earnings from the
b. Discuss the advantages associated with a stock dividend from the issuing corporation's viewpoint.
c. For financial accounting purposes, explain how the cost of a stock dividend is measured at the date of declaration.