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 shareholders' 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 2-for-1 stock split does not affect retained earnings because it simply divides the existing shares into more shares without changing the equity structure. In contrast, a 100% stock dividend would distribute additional shares to shareholders, reducing retained earnings by transferring a portion of it to common stock.

Which of the Following Statements Accurately Explains Why the Board