If the Total Assets of a Firm Are Unaffected by a Stock

question 109

Multiple Choice

If the total assets of a firm are unaffected by a stock dividend, then:

• A) the stock should retain the same price per share.
• B) stock dividends should be preferred by corporations over cash dividends.
• C) an investor's wealth should not be changed by the dividend.
• D)only bondholders benefit from stock dividends.

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Definitions:

Price-Earnings Ratio

A valuation ratio comparing a company’s current share price to its per-share earnings, helping investors evaluate if a stock is over or under-valued.

Net Profit Margin

A financial ratio that shows the percentage of net income generated from total revenue.

Gross Margin

The difference between sales revenue and the cost of goods sold, representing the profitability before deducting operating expenses.

Return On Total Assets

A financial ratio that measures the net income produced by total assets during a period by comparing net income to the average total assets.