Question

A dividend is a distribution of profits by a corporation to its shareholders. When a corporation...

A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a proportion of the profit as a dividend to
shareholders. Two important types of Dividends are Cash dividend and stock Dividend. There is a saying that some time, in short term Stock dividend favors the company but not in long term. Your detailed comments are needed.

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Cash dividend involves paying cash dividend as a percentage on par value of common stock. Stock dividend is dividend declared on outstanding commons shares. It is payable on number of common shares outstanding multiplied by stock dividend declared % multiplied by the market price of the share. Stock dividend rewards shareholders but is not favourable and sustainable to the company in the long run

  • It increases the capital base of the company. Hence all future dividend payouts will increase
  • It involves giving dividend at the market value of the share. Hence higher the market value of the share it will increase the total payout to the shareholders
  • It will reduce the Earnings per share available to shareholders since capital base will increase and existing net profit will be divided by more shares.
  • Lower Earnings per share will reduce the market price of the share
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
When a corporation distributes money or property to its shareholders, the distribution may be treated as:...
When a corporation distributes money or property to its shareholders, the distribution may be treated as: I) A dividend, to the extent that the corporation has earnings and profits II) A loan to the share holders III) a reduction in stock outstanding IV) a gain from the sale of stock Select one A) I Only B) II, III, IV C) II and IV D) I and IV   
Dividends A distribution by a corporation to a shareholder with respect to its stock will constitute...
Dividends A distribution by a corporation to a shareholder with respect to its stock will constitute a capital gain to a shareholder: Only when there are “earnings and profits” of a corporation Only when there are no “earnings and profits” of a corporation To the extent of the shareholder’s basis in the stock To the extent a distribution exceeds a shareholder’s basis in his stock If a corporation has current year earnings and profits and negative accumulated earnings and profits...
Corporation A owns 10% of Corporation C. The marginal tax rate on non-dividend income for both...
Corporation A owns 10% of Corporation C. The marginal tax rate on non-dividend income for both A and C is 21%. Corporation C earns a total of $200200000 before taxes in the current year, pays corporate tax on this income and distributes the remainder proportionately to its shareholders as a dividend. In addition, Corporation A owns 40% of partnership P that earns $500200000 in the current year. Given this fact pattern, answer the following questions: a. How much cash from...
Assume that Wansch Corporation is expected to pay a dividend of $2.25 per share next year....
Assume that Wansch Corporation is expected to pay a dividend of $2.25 per share next year. Sale and profits for Wansch are forecasted to grow at a rate of 20% for the next two years, then grow at 5% per year forever thereafter. Dividends and sales growth are expected to be equal. If Wansch's shareholders require 15%, what is the per share value of Wansch's common stock?
32. The liability of shareholders is a. similar to the liability of the owners of a...
32. The liability of shareholders is a. similar to the liability of the owners of a partnership. b. similar to the liability of the owner of a proprietorship. c. equal to an amount sufficient to satisfy all creditors. d. limited to their property or service invested in the corporation. 33. Callable preferred shares a. may be redeemed at any time at the shareholder’s option. b. may be called or redeemed at the option of the issuing corporation. c. usually have...
For the scenario below, determine the amount of tax that the shareholder receiving the dividend income...
For the scenario below, determine the amount of tax that the shareholder receiving the dividend income must pay on the dividend they receive. All entities below are C corporations. Assume all types of taxable income for a C corporation are taxed at a 21% tax rate. Trinity Corporation owns 50 percent of Salient Corporation. In Year 1, Salient pays out a total of $2 million in cash dividends to all its shareholders, giving each owner a dividend in proportion to...
Read the scenario. Assume your firm has never distributed cash to its shareholders. However, now you...
Read the scenario. Assume your firm has never distributed cash to its shareholders. However, now you are trying to determine the appropriate way to distribute some cash that is consistent with maximizing shareholder wealth. Step 2 Using the information presented in the scenario answer the following questions: Why would a dividend distribution be important? What type of dividend policy should you adopt? List at least two options. What factors impact the dividend policy decision? Would a stock split or a...
On December 31, 2020, Cullumber Corporation had the following shareholders’ equity accounts: CULLUMBER CORPORATION Balance Sheet...
On December 31, 2020, Cullumber Corporation had the following shareholders’ equity accounts: CULLUMBER CORPORATION Balance Sheet (partial) December 31, 2020 Shareholders’ equity      Common shares (unlimited number of shares authorized, 86,000 issued) $1,156,000      Retained earnings 560,000 Total shareholders’ equity $1,716,000 During the year, the following transactions occurred: Jan. 15 Declared a $1 per share cash dividend to shareholders of record on January 31, payable February 15. July 1 Announced a 3-for-2 stock split. The market price per share on the date...
answer all questions please Cerner Corporation announced a first-come, first-serve stock repurchase offer to its shareholders...
answer all questions please Cerner Corporation announced a first-come, first-serve stock repurchase offer to its shareholders – the company agreed to repurchase 2,653,780 shares of its common stock in exchange for total consideration of $173,434,000. Cerner had 329,641,500 total shares outstanding before the redemption. You acquired 16,482,075 shares of Cerner's stock two years ago for $20/share. You were the only shareholder to participate in the repurchase offer and Cerner agreed to redeem the total number of shares directly from you....
1. If stock prices should be based on future cash flows (i.e., dividends) why do investors...
1. If stock prices should be based on future cash flows (i.e., dividends) why do investors purchase stocks of companies that do not pay dividends? 2. There are some that say that U.S. firms concentrate too much on short-term profits and not enough on long-term profits. Do you agree? How does this conflict with the valuation of stock based on future cash flows. 3. Describe the Efficient Market Hypothesis. 4. Describe Weak efficiency Semi-strong efficiency Strong efficiency Which, if any,...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT