The primary reason companies declare a large stock dividend or a stock split is to lower the trading price of the stock to a more acceptable trading range, making it attractive to a larger number of potential investors. True or false?

Question

Business

Nathalie Faulkner

25 November, 00:33

The primary reason companies declare a large stock dividend or a stock split is to lower the trading price of the stock to a more acceptable trading range, making it attractive to a larger number of potential investors. True or false?

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Answers (1)

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Priscilla · Answer 1

true

Explanation:

A stock dividend refers to the payout to owners that is provided not in cash but in equity. The stock dividends does have the benefit of paying stakeholders without lowering the cash flow for the business.

A stock split and option split is growing a company's amount of assets. A stock split triggers a fall in the trading price of actual securities, which does not trigger a shift in the business's market capitalisation.

Thus there is no monetary gain benefits from both the methods they are just implemented to adjust price of shares.