Question

Which of the following statements are true regarding dividends? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.) A stock dividend increases the number of outstanding shares. unanswered A stock dividend commonly indicates management's confidence that the company is doing well. unanswered A large stock dividend is recorded by capitalizing retained earnings for the market value of the stock. unanswered The payment date reflects the date a cash dividend is paid to stockholders.

Answer 1

Answer:

The options that are true regarding dividends include:

1. A stock dividend increases the number of outstanding shares.
2. A stock dividend commonly indicates management's confidence that the company is doing well.

Explanation:

A stock dividend is a payment to shareholders that is made in shares rather than in cash.

Once investors receive stock dividends, the number of their shares will increase. this validates the first statement

Secondly, stock dividends have a tax advantage for the investor. The share dividend, like any stock share, is not taxed until the investor sells it unless the company offers the option of taking the dividend as cash or in stock.

The stock dividend has the advantage of rewarding shareholders without reducing the company's cash balance thereby indicating management's confidence in the company is well-being.

Answer 2

Answer:

1. A stock dividend increases the number of outstanding shares.

2. A stock dividend commonly indicates management's confidence that the company is doing well.

Explanation:

1. It is established that when a business earns profit, dividend payment inadvertently ensues. The implication is that a stockholder or shareholder is more richer. When there is a dividend payment to a stock holder, it's usually accompany by the drive to have more units of stock. In other cases, as found in some establishments, a stock dividend is usually done by issuing additional shares to shareholders. Suffix to say, this is done when the organization is doing well in operational performance. So, we say this statement is true.

2. A stock dividend commonly indicates management's confidence that the company is doing well. This is a no brainer because a dividend payout is a signal that a company's is making profit. The element of the profit not retained for the business, and thus pay out to the business owner is the stock dividend. The issus of additional shares in point 1 above further lends credence to the fact that the firm is doing well in performance. The resultant effect if this is that management and other critical stakeholders confidence is boosted. More equity finance can be generated and properly utilized to further improve performance.

The foregoing statements are thus true for dividend.