Which of the following statements accurately explains why the board of directors of a company that is facing financial difficulties 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

A stock split does not affect retained earnings, while a stock dividend reduces retained earnings by transferring a portion to the common stock account.

Which of the Following Statements Accurately Explains Why the Board