Which of the following is TRUE of a stock split and a stock dividend?
A) A stock split will increase total stockholders' equity, but a stock dividend will not.
B) Neither a stock split nor a stock dividend will increase total stockholders' equity.
C) A stock dividend will increase total stockholders' equity, but a stock split will not.
D) A stock split will decrease retained earnings, but a stock dividend will not.

Question

Quizplus · Accepted Answer

Neither a stock split nor a stock dividend increases the total stockholders' equity. Both actions simply rearrange the composition of shareholders' equity but do not add to it. A stock split increases the number of shares while reducing the price per share without affecting the total value of equity. Similarly, a stock dividend redistributes retained earnings to additional shares without increasing the overall equity.

Which of the Following Is TRUE of a Stock Split