Paul Merema, a disciplined investor, prefers the stock of a company with a higher ratio of retained earnings against contributed capital, preferably above 2 in his opinion. He finds LMN Company acceptable because the equity breakdown at June 30, its year end, is as follows:
On July 1, the day after its year end, LMN announced it will declare a 22% stock dividend. The stock price on this date is $20 per share.
With which accounting treatment will Paul be more pleased-a large or a small stock dividend?

Question

Paul Merema, a disciplined investor, prefers the stock of a company with a higher ratio of retained earnings against contributed capital, preferably above 2 in his opinion. He finds LMN Company acceptable because the equity breakdown at June 30, its year end, is as follows:
  On July 1, the day after its year end, LMN announced it will declare a 22% stock dividend. The stock price on this date is $20 per share.
With which accounting treatment will Paul be more pleased-a large or a small stock dividend?

Quizplus · Accepted Answer

The Answer of Paul Merema, a disciplined investor, prefers the stock of a company with a higher ratio of retained earnings against contributed capital, preferably above 2 in his opinion. He finds LMN Company acceptable because the equity breakdown at June 30, its year end, is as follows:
  On July 1, the day after its year end, LMN announced it will declare a 22% stock dividend. The stock price on this date is $20 per share.
With which accounting treatment will Paul be more pleased-a large or a small stock dividend?

Paul Merema, a Disciplined Investor, Prefers the Stock of a Company