If you were an individual, would you prefer to receive cash dividends, stock dividends, or stock...

If you were an individual, would you prefer to receive cash dividends, stock dividends, or stock split? Describe why and the benefits to support your decision.

Expert Solution

I would prefer to receive Cash Dividends over stock dividends and stock split.

Companies often pay dividend to their shareholders in cash only. These cash can be used by the shareholders to expend or invest in deposits, bonds or shares of other companies. Thus the shareholder will have full control over the amount received as dividend.

Benefits :-

1. Cash dividend has many benefits over stock dividend and stock split primarily being availability of cash with the Individual.

2. Cash dividends are exempt from tax at the hands of the shareholder to some extent whereas in case of stock dividend and stock split tax is chargeable over the excess earned.

3. Cash dividends can be used by the individual as he deems fit. He can invest the funds in other companies, deposits ,bonds etc which may offer a higher rate of interest than the stock dividends/stock split which remain invested in the same company .

4. Cash dividends also assures shareholder of good financial position of the company. Stock dividends/stock split are offered by the company when the company is facing liquidity crunch.

ekkarill92 answered 1 year ago

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