The board of directors is considering a stock split or a stock dividend. They understand that total stockholders' equity will remain the same under either action. However, they are not sure of the different effects of the two types of actions on other aspects of stockholders' equity.
Explain the differences to the directors.
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<br>Companies sometimes increase the number of shares outstanding (and at the same time reduce the value of each share) by issuing stock dividends or stock splits. These events are usually non-taxable, but change the number of shares you own and the basis of those shares.
<br> A stock dividend is ...
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