How Would the Declaration of a 20 Percent Stock Dividend

question 45

Multiple Choice

How would the declaration of a 20 percent stock dividend by a corporation affect each of the following on its books? Retained Total Stock-
Earnings holders' Equity

• A) Decrease No effect
• B) Decrease Decrease
• C) No effect Decrease
• D) No effect No effect

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Definitions:

Rate Of Return

The success or failure of an investment over a tailored period, represented in terms of the percentage of the investment's cost price.

Preferred Stock

A type of stock that provides a fixed dividend before any dividends are paid to common stockholders and typically has priority over common stock in the event of bankruptcy.

Supernormal Growth

A period of elevated growth rates above and beyond a company's stable growth phase, often due to unique or exceptional circumstances.

Constant Growth Rate

A steady, unchanging rate at which a company's dividends or earnings are expected to grow over time.