Question

All of the following statements regarding stock dividends are true except : A. Stock dividends provide evidence of management's confidence that the company is doing well. B. Directors can use stock dividends to keep the market price of the stock affordable. C. Stock dividends decrease the number of shares outstanding. D. Stock dividends do not reduce assets or equity. E. Stock dividends transfer a portion of equity from retained earnings to contributed capital.

Answer 1

Answer: Stock dividends decrease the number of shares outstanding.

Explanation:

A stock dividend does not affect the total equity, but rather the transfer amounts that exists between the components of the equity.

Stock dividends also shows evidence of the confidence of the management that the company is doing well and that the directors can use it to keep market price of stock affordable.

The option that Stock dividends decrease the number of shares outstanding is not true.