Stock dividends
A) Have the same effects on financial statements as cash dividends.
B) Are similar to stock splits in that they do not change the fundamental position of current shareholders.
C) Must be accompanied by cash dividends.
D) Are viewed unfavorably by investors and thus should not be used.
E) Have no effect on a firm's balance sheet.

Question

Quizplus · Accepted Answer

Stock dividends are similar to stock splits as they do not change the fundamental position of current shareholders. They increase the number of shares outstanding but do not affect the company's overall equity or assets. Therefore, they do not have the same effects on financial statements as cash dividends. They do not need to be accompanied by cash dividends and are not necessarily viewed unfavorably by investors. They do have an effect on a firm's balance sheet, by reducing retained earnings and increasing the stockholders' equity section for common stock.

Stock Dividends