The Par Value of Stock Is Reduced When Stock Dividends

question 54

Essay

The par value of stock is reduced when stock dividends are issued.

Calculate net investment income and the related surtax.

Identify the distinctions between ordinary income and capital gains.

Understand the rules for carryover of capital losses and how they affect future taxable income.

Understand the principles of situational leadership.

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Definitions:

ROE

Return on Equity, a measure of financial performance calculated by dividing net income by shareholders' equity, indicating how effectively management is using a company’s assets to create profits.

Dividend Growth Rate

The annualized percentage rate of growth of a company's dividend payments to shareholders.

Plowing Back

The reinvestment of earnings by a company back into its business rather than distributing them as dividends to shareholders.

Risk-Free Rate

The risk-free rate is the theoretical rate of return of an investment with zero risk, often represented by the yield on government bonds.