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

Expert Solution

Difference is given below in tabular form.

	Stock dividend	Stock Split
1	Stock dividend is a process of issuing new stock to current stockholders free of cost.	Stock split is a method by which one stock is divided into multiple number of stock. Say stock split of 4 for 1, It means 4 shares converted into 1 share.
2	Stock dividend is an alternate of cash dividend. Only difference is stockholders don’t get money but get new shares.	Stock split is done to increase the value of the company and sometimes stock split is done to make shares more affordable for investors.
3	Issue of Stock dividend increase number of shares and total paid up capital.	Number of shares increase but the paid up capital remains same.
4	Stock dividend reduces retained earnings.	Stock split have no effect on retained earnings.
5	The market value of shares remains same when stock dividend are issued.	The market value of shares decreases everytime stock split is done.

ekkarill92 answered 8 months ago

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