Distinguishing a Stock Dividend from a Stock Split Can Sometimes

question 27

Multiple Choice

Distinguishing a stock dividend from a stock split can sometimes cause difficulties.Usually firms treat small-percentage distributions, say less than a _____ increase in the number of shares, as stock dividends and larger ones as stock splits.

• A)5%
• B)10%
• C)25%
• D)50%
• E)100%

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Definitions:

Marginal Cost

The incremental cost incurred from the production of an extra unit of a product or service.

Perfect Competition

A market structure characterized by a large number of small firms, similar products, and easy market entry and exit, leading to efficient outcomes.

Perfect Knowledge

Refers to a market condition where all participants have access to all necessary information to make informed decisions.

Perfect Competition

A market structure characterized by a large number of small firms, a homogeneous product, freedom of entry and exit, and perfect information, leading to price-taking behavior.