Its July 1, 2015, and the market price of Warm Ways common stock (Problem P15-3) is $175
Question:
The chief financial officer of the company has proposed two ways to distribute common shares and still manage to pay cash dividends:
• Option A: Split the stock 12 for 10.
• Option B: Increase the size of the stock dividend from 20% to 30%, and record the share distribution as a stock split.
Required:
1. How will these two approaches affect the company’s retained earnings?
2. As a common stockholder, would you prefer a 20% stock dividend, a 12-for-10 stock split, or a 30% stock dividend? Why?
Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most... 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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Related Book For
Financial Reporting and Analysis
ISBN: 978-0078025679
6th edition
Authors: Flawrence Revsine, Daniel Collins, Bruce, Mittelstaedt, Leon
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