Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 71

Stock splits versus stock dividends Assume that you own 600 shares of common stock of a company, that you have been receiving cash dividends of $6 per share per year, and that the company has a 4-for-3 stock split.

Required:

a. How many shares of common stock will you own after the stock split?

---

b. What new cash dividend per share amount will result in the same total dividend income as you received before the stock split?

---

c. What stock dividend percentage could have accomplished the same end result as the 4-for-3 stock split?

Step 1 of 6

Stock split v/s stock dividend

Stock split : It is a corporate act in which existing shares of an organization are divided into multiple shares.

Stock dividend : It is a mode of dividend disbursement made in the terms of additional shares, instead of a cash payout.