Question

Identify all of the following statements that are correct with regards to dividends and stock splits:

a. The record date is the date that will determine who is eligible to receive a dividend.

b. When a stock split occurs, a share’s market value will decline and, initially, each shareholder’s wealth will decline.

c. Companies are not required to declare and issue dividends to common shareholders, but companies are required to declare and issue a dividend to preferred shareholders.

d. If a person holds 25% of the common shares in a company, they will receive 25% of the total dividends paid on common shares.

e. Both cash dividends and stock dividends decrease shareholders’ equity.

f. The advantage of a stock split is that it may increase the marketability of the shares by lowering the share price.

g. The Canada Business Corporations Act requires that stock dividends be recorded at book value.

h. When a stock dividend is declared, additional shares will be issued to each shareholder based on the proportion of the outstanding shares that each of the shareholders owns on the date of declaration.

Answer 1

Answer:

a.The date of record is the date set by the company when it will determine which shareholders are eligible for dividend and which are not,The dividend will be paid to those who own shares on the record date.

d.If a person holds 25%of common shares in a company,they will receive 25%of the total dividends paid on common shares

f.Stock split reduces the market price,making stocks are more affordable to potential investors.

h.When a stock dividend is declared,additional shares will be issued to each shareholder based on the proportion of the outstanding shares the each shareholder owns on the date of declaration.