Firm X has declared a stock dividend that pays one share of stock for every 5 shares owned. After the stock dividend, earnings per share will

Question

Quizplus · Accepted Answer

A stock dividend increases the number of shares outstanding, which dilutes the earnings per share (EPS). Since the dividend is 1 share for every 5 shares, the number of shares increases by 20%, leading to a 20% decline in EPS.

Firm X Has Declared a Stock Dividend That Pays One