Q17RQ - Horngren'S Financial And Managerial Accounting

Question

What are some reasons corporations issue stock dividends?

Step-by-Step Solution

Answer

A corporation may issue a stock dividend instead of paying a cash dividend to minimize cash distribution, decrease market price of each share, increase no of shares of stock outstanding.

Step 1: Introduction to topic

A dividend is a providing of portion of profit earned by the company by business operation, decided by the management to be distributed among stockholders.

Step 2: Some reasons corporations issue stock dividends

A company issues stock dividends for several reasons:

a. To proceed dividends but minimize distributing cash

b. To decrease the market price per share of corporate's stock

c. To reward stockholders

d. To increase the quantity of shares of stock outstanding