Which of the following describes the effect of a stock dividend?
A) A stock dividend immediately increases the market price of a share of stock.
B) A stock dividend immediately decreases the paid-in capital account.
C) A stock dividend immediately increases the number of shares outstanding.
D) A stock dividend indicates that the company must be short on cash.

Question

Quizplus · Accepted Answer

A stock dividend increases the number of shares outstanding, but does not immediately affect the market price or the paid-in capital account. It is often seen as a way for a company to distribute some profits to shareholders without using cash, as the new shares are simply created and distributed proportionally to existing shareholders.

Which of the Following Describes the Effect of a Stock