Stocks

Paper Summary:

This paper discusses stocks. It defines stock dividends and gives an example of stock dividends in a fictitious company. It then discusses stock splits and gives an example of a situation involving stock splits. The paper then compares stock dividends to stock splits and it discusses how a company would decide whether it wants to use a stock dividend or a stock split.

From the Paper:

"Stock dividends are normally paid in common shares, and are used instead of a cash dividend to pay the stockholders. Therefore, if the stockholder owned hundred shares of a company that had declared a 1 % stock dividend, then it would mean that the stockholder would receive one more share of stock from the newly formed reserves of the company. A company that wished to tighten its financial belt would choose the option of stock dividends instead of cash dividends, because of the simple fact that this would help to conserve cash, while at the same time allowing its shareholders to benefit from its share holdings and earnings. A stock split, which is nothing but an increase in the company's outstanding common stock, means that the company's market price per share would be adjusted. (Equities: stock splits and dividends)"

Sample of Sources Used:

• Besley, Scott; Brigham, Eugene F. Essentials of Managerial Finance with Infotrac. Thomson South-Western. 2004.
• Definition of stock splits on the web. Retrieved From http://www.google.co.in/search?hl=en&lr=&defl=en&q=define:Stock+Splits&sa=X&oi=glossary_definition&ct=title Accessed 28 June, 2006
• Discussion issues and Derivations. Retrieved From http://pages.stern.nyu.edu/~ADAMODAR/New_Home_Page/AppldCF/derivn/ch10deriv.html Accessed 30 June, 2006
• Equities: stock splits and dividends. Retrieved From http://www.prudential.com/simpleArticle/0,1470,intPageID%253D1971%2526blnPrinterFriendly%253D0,00.html Accessed 30 June, 2006
• Heintz, James A; Parry, Robert W. College Accounting. Thomson South-Western. 2004.

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