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r.raza
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Joined: 30 Dec 2008
Location: Canada
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Posted: 01 Feb 2009 at 02:40 \| IP Logged

Hi guys

I don't think, any thing is wrong.

In 1st Q... Declaration and issuance of a stock dividend...

Yes D is correct (has no effect on total assets, liabilities, or shareholders' equity), but it has impact on net profit.

Becker Q is also correct... yes its correct that deceleration of stock dividend has no effect on current ratio but it do have impact on profit of a firm. So as per my understandings both questions are correct.

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bala
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Posted: 01 Feb 2009 at 12:35 \| IP Logged

I also agree with raza, in both qns option D is right. in qn 2 Becker has explained it pretty well.

arushi_13
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Joined: 09 Feb 2008
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Posted: 01 Feb 2009 at 12:44 \| IP Logged

In my opinion,
Stock dividends have no effect on profitability of the Co.The reason to have stock dividends is to make the shares attractive to investors.
The value/share decreases but the total no. of shares remain the same.e.g after a Co. declares 100% stock dividend on 100m shares with per share market price of $12, it has 200m shares each with market value of $6.The above JE is done and hence, no impact on the B/S of the Co.

I still think that Becker's explanation for point c as not being the right answer is wrong.

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r.raza
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Joined: 30 Dec 2008
Location: Canada
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Posted: 01 Feb 2009 at 19:31 \| IP Logged

Hi Arushi

Sorry but I think you are mixing stock divident with stock split... Stock Divident are stock split both different things. What you're saying this stock split not stock divident.

I am still confident that Becker is right...

Anyone can verify please.

Thanks

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