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1. What is a stock dividend?
1. What is a stock dividend?
A stock dividend is a distribution of additional shares of stock to current shareholders of the corporation.Â
2. Why do companies issue stock dividends?
2. Why do companies issue stock dividends?
Companies try to give shareholders the illusion that they are receiving a real dividend.
To enable the corporation to take advantage of the accepted accounting practice of capitalizing retained earnings.
3. What is a stock split?
3. What is a stock split?
A stock split is stock dividend of 25% or higher, sometimes called a large stock dividend.
4. Why do companies split their shares?
4. Why do companies split their shares?
To reduce the per share market price.
The motivation for reducing the per share market price is to increase the stock's marketability by making it attractive to a larger number of potential investors.
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