A firm has declared a stock dividend that pays 1 share of stock for every 11 shares owned.After the stock dividend,earnings per share will:

Question

Quizplus · Accepted Answer

A stock dividend does not affect the earnings of a company. However, the number of shares outstanding will increase due to the stock dividend. This means that the earnings per share (EPS) will be spread over more shares, leading to a decline in EPS. In this case, the stock dividend is 1 share for every 11 shares owned, which means that the number of shares outstanding will increase by approximately 9.1% (1/11). Therefore, the EPS will decline by 9.1%.

A Firm Has Declared a Stock Dividend That Pays 1