Bass Products Corporation , a public corporation, for twenty years has followed the practice of paying a
Question:
Bass Products Corporation, a public corporation, for twenty years has followed the practice of paying a cash dividend every quarter and has promoted itself to investors as a stable, reliable company. Recent competition from Asian companies in its industry has negatively affected its earnings and cash flows. As a result, Sandra Bass, president of the company, is proposing to the board of directors that the board declare a stock dividend of 5 percent this year instead of a cash dividend. She says, ″This will maintain our consecutive dividend record and will not require any cash outflow.″ What is the difference between a cash dividend and a stock dividend? Why does a corporation usually issue them and how does each affect the financial statements? Is the action proposed by Bass ethical?
Intermediate Accounting
ISBN: 978-0470423684
13th Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield