Stock Dividends

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Stock dividends -

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A. must be accompanied by cash dividends.

B. are similar to stock splits in that they do not change the fundamental position of current shareholders.

C. have the same effects on financial statements as cash dividends.

D. are viewed unfavorably by investors and thus should not be used.

E. have no effect on a firm's balance sheet. B

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Explanations

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A. B. C. D. E.

Explanation

Stock dividends are dividends paid in the form of additional shares of stock rather than in cash. The total number of shares is increased, so earnings, dividends, and price per share all decline. Stock dividends that are used on a regular basis will keep the stock price more or less constrained, that is, within a desired trading range.

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