Question

CCH After establishing operating Cookie & Coffee Creations Me. and common stock. After the first year of operations, mation for the year. chopan Go to Wiley PLUS for complete case details and instructions, vidends (15 years). The have been greatly in on the company to meet only day-to-day operating EC14 Molina Corporation has paid 60 consecutive quarterly cash dividen months, however, have been a cash drain on the company, as profit margins ha by increasing competition. With a cash balance sufficient to meet only day-to president, Rob Lowery, has decided that a stock dividend instead of a cash divide He tells Molina's financial vice president, Debbie Oler, to issue a press release stati is extending its consecutive dividend record with the issuance of a 5% stock divide release convincing the stockholders that the stock dividend is just as good as a cash di "Just watch our stock rise when we announce the stock dividend. It must be a good thing Instructions dividend should be dela stating that the contes dividend. "Write the sh dividend," he thing iſ that happens a. Who are the stakeholders in this situation? b. Is there anything unethical about Lowery's intentions or actions? c. What is the effect of a stock dividend on a corporation's stockholders' equity accounts would you rather receive as a stockholder-a cash dividend or a stock dividend? Why?

Answer 1

Following are the answer,

1. Ans : In Normal term stakeholder of the companies are Owners ( Shareholders) , Creditors, Directors,Employees and government. In the situation Molilna corporation stakeholder is their shareholders to whom they declared dividend.  Mr.Rob Lowery (President) and VP Finance Mr. Debbie oler (VP Finance) also stakeholders.

2. Ans. : There is nothing unethical in Lowery''s intention and action. Its basic principal of business that every business needs proper working capital to grow smooth manner. In last years Molina Corporation never faced and cash flow problem and based on growth paid timely dividend to shareholders. During the year they have never denied for dividend but instead of cash dividend the proposed for Stock Dividend.

3. Ans. : Stock Dividend have no effect on total amount of stockholders equity investment. This effect is nothing but just reducing the retained earning of company and increase the share capital.

Cash Dividend are cash payment to shareholders wheres stock dividends are additional share issue to shareholders.

Example : If A has 100 Shares of $1 the in cash dividend of 10% he will get $10 which will reduce from retained earning from Company and share holding remain same as 100 shares. While in Stock Divided 10% shareholding will increase from 100 shares to 110 shares by reducing retained earning.

Stock Dividend and cash dividend both are good option but as company facing cash flow problem then is good to have stock dividend because it gives rise to no. of shares holding which result more dividend in future years.