Part 1: Please answer the following with a minimum of 250 words.

Contrast the differences between a stock dividend and a stock split. Imagine that you are a stockholder in a company. Determine whether you would prefer to see the company that you researched declare a 100% stock dividend or declare a 2-for-1 split. Provide support for your answer with one (1) real-world example of your preference.

Part 2: Please respond and comment on the below with a minimum of 100 words.

The difference is largely one of accounting. In the case of a split, the firm simply increases the number of shares and simultaneously reduces the par or stated value per share. In the case of a stock dividend, there must be a transfer from retained earnings to capital stock. For most firms, a 100% stock dividend and a 2-for-1 split accomplish exactly the same thing; hence, investors may choose either one (Brigham & Ehrhardt 2014). When stock splits occur the share price will go down accordingly with the hope that additional investors will now have the funds to acquire an interest in the company. When stock price is too high it won’t attract certain investors. I do not have a preference in the company I researched declaring a 100% stock dividend or a 2-for-1 split because they are accomplishing the same thing for the company in the long run.

Part 3: Please respond and comment on the below with a minimum of 100 words.

A stock dividend does not involve cash. It is the distribution of more shares of the corporationbs stock. When a corporation does not want to part with its cash, if the board of directors approves letbs say a 10% stock dividend, each stockholder will get an additional share for each 10 shares held. Even though the total amount of stockholdersb equity remains the same, a stock dividend requires a journal entry to transfer an amount from the retained earnings section of the balance sheet to the paid-in-capital section of the balance sheet.

All companies that are publicly traded have a certain number of shares outstanding, or stock shares that have been issued and purchased by investors. When a company decides to split its stock, it increases its number of shares outstanding by issuing additional shares to its current shareholders. When a company splits its stock, it can decide on the split ratio. The most commonly seen stock split ratios are 2-for-1, and 3-for-2, though other combinations are possible as well.