Which of the Following Is True

question 5

Multiple Choice

Which of the following is true?

• A) A 10% stock dividend would increase stockholder wealth by $5 if the current price of stock is $50 (ignoring transaction costs).
• B) Stock dividends are not true dividends.
• C) Stock splits involve a small increase (splintering) in total stock outstanding.
• D) The most common dividend policy involves regular cash payments with year-end bonuses.

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Definitions:

Depreciation

The systematic allocation of the depreciable amount of an asset over its useful life.

Equipment

Tangible assets used in the operation of a business to perform specific tasks, not intended for sale in the ordinary course of business.

Machinery

A category of physical equipment used in the production or manufacturing process.

Indirect Expenses

Costs not directly linked to the production of goods or services, such as office supplies and utility costs.