If a company does not have enough cash to pay out regular dividends, but still wishes to give the shareholders something that they would consider of value, the company should consider doing a stock split.

Question

Quizplus · Accepted Answer

A stock split does not involve giving shareholders something of value. Rather, it involves dividing an existing share into multiple shares, with the total value of those shares remaining the same. If a company does not have enough cash to pay out regular dividends, they may explore other options such as share buybacks or reinvesting profits back into the business.

If a Company Does Not Have Enough Cash to Pay