Which of the following statements accurately explains why the board of directors of a company whose financial future contains some uncertainties might issue a 2-for-1 stock split rather than declare a 100% stock dividend?
A)A stock split would not reduce the market price per share,whereas a stock dividend would.
B)A stock split would reduce the market price per share,whereas a stock dividend would not.
C)A stock split would increase total stockholders' equity,whereas a stock dividend would not.
D)A stock split would not reduce Retained Earnings,whereas a stock dividend would.

Question

Quizplus · Accepted Answer

Both stock dividends and stock splits increase the number of shares outstanding and decrease the per-share market price.Stock dividends are recorded by transferring an amount from Retained Earnings to contributed capital accounts.If the board of directors expects that the company will struggle financially in the future,it will prefer a stock split because it doesn't reduce Retained Earnings,so it doesn't reduce the company's ability to declare cash dividends in the future.

Which of the Following Statements Accurately Explains Why the Board