Which of the following statements is true?
A)Stock splits and stock dividends both reduce the market price of a share,but only stock splits reduce the par value of a share.
B)Stock splits and stock dividends both reduce the market price of a share and the par value of a share.
C)Stock splits and stock dividends both reduce the market price of a share,but only stock dividends reduce the par value of a share.
D)Stock splits and stock dividends both reduce the market price of a share and reduce retained earnings.

Question

Quizplus · Accepted Answer

Stock splits and stock dividends both result in an increase in the number of outstanding shares and a decrease in the earnings per share, which leads to a reduction in the market price of a share. However, only stock splits decrease the par value of a share, while stock dividends do not affect the par value. Therefore, statement A is true. Statement B is incorrect as stock dividends do not affect the par value of a share. Statement C is incorrect as both stock splits and stock dividends decrease the market price of a share. Statement D is incorrect as stock dividends do not reduce retained earnings, while stock splits may or may not lead to a reduction in retained earnings depending on the specific accounting treatment used.

Which of the Following Statements Is True