A ________ has an effect on the firm's share price similar to that of a ________.
A) stock repurchase; stock split
B) stock dividend; stock split
C) cash dividend; stock dividend
D) cash dividend; stock split

Question

Quizplus · Accepted Answer

A stock dividend and a stock split both increase the number of shares outstanding, which dilutes the earnings and potentially decreases the market value per share. Therefore, both actions have a similar effect on the firm's share price. A stock repurchase would have the opposite effect, as it reduces the number of shares outstanding and potentially increases the market value per share. A cash dividend does not directly affect the number of shares outstanding, but it may have an indirect effect on the share price by signaling the company's financial strength and potential for future growth.

A ________ Has an Effect on the Firm's Share Price