Cooper Corporation has paid 60 consecutive quarterly cash dividends (15 years). The last 6 months have been

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Cooper Corporation has paid 60 consecutive quarterly cash dividends (15 years). The last 6 months have been a real cash drain on the company, however, as profit margins have been greatly narrowed by increasing competition. With a cash balance sufficient to meet only day-to-day operating needs, the president, Sonny Boyd, has decided that a stock dividend instead of a cash dividend should be declared. He tells Cooper's financial vice president, Dana Marks, to issue a press release stating that the company is extending its consecutive dividend record with the issuance of a 5% stock dividend. "Write the press release convincing the stock- holders that the stock dividend is just as good as a cash dividend," he orders. "Just watch our stock rise when we announce the stock dividend; it must be a good thing if that happens."
Instructions
(a) Who are the stakeholders in this situation?
(b) Is there anything unethical about president Boyd's intentions or actions?
(c) What is the effect of a stock dividend on a corporation's stockholders' equity accounts?
Which would you rather receive as a stockholder-a cash dividend or a stock dividend? Why?
Stakeholders
A person, group or organization that has interest or concern in an organization. Stakeholders can affect or be affected by the organization's actions, objectives and policies. Some examples of key stakeholders are creditors, directors, employees,...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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Accounting Tools for Business Decision Making

ISBN: 978-1118096895

6th edition

Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso

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