2. What is the difference between a stock dividend and a stock split?

As a stockholder, would
you prefer to see your company declare a 100% stock dividend or a two-for-one split? Assume
that either action is feasible.

ANS: The difference is largely one of accounting. In the case of a split, the firm simply increases
the number of shares and simultaneously reduces the par or stated value per share. In the case of
a stock dividend, there must be a transfer from retained earnings to capital stock. For most firms,
a 100 percent stock dividend and a 2-for-1 stock split accomplish exactly the same thing; hence,
investors may choose either one.