Question

1. explain the difference between: a cash dividend, a stock dividend, and a stock split?

2.explain the difference between: authorized shares, issued shares, outstanding shares, and treasury stock?

Answer 1

Cash Dividends

Cash dividends are investments that offer a cash payout to investors/shareholders from the company earnings based on the number of shares owned by the investor. This payout is taxable income, and it means that the company doesn’t have this money to use for growth or operations.

By providing this money to investors, a company’s stock price will be affected. If a company pays out a cash dividend of 10%, the shareholders will see their shares drop by a 10% value as well.

In short, when you receive a cash dividend, you pay taxes on it and also see a drop in the value of the shares you own. The company you hold shares with will no longer have that income to draw from for operations as well. However, this is a beneficial system for those looking to live off of their dividends as they act as a cash income. The investment itself with the shares offers investors access to an investment with capital appreciation.

The Basis of Comparison Between Stock Dividend vs Stock Split	Stock Dividend	Stock Split
Meaning	Dividend in the form of Equity Shares	Division of Equity Shares
Purpose	When there is no Cash Liquidity with the company	To reduce the market price of Share
Issued from	Issued from the Free Reserves	Only increase In the no. of shares, no change in Value of Issued Shares.
Shares	Additional Shares are allotted to existing shares Holder	Already Held Shares are divided
Accounting	Amount from Reserves is transferred to issued shares by passing Journal entry	Whereas no Journal Entry is passed in
Type	No type	Two types of Stock Split: Forward Stock Split Reverse Stock Split

2)Authorized shares

When a company incorporates, no matter its size, it files a charter with its state government. Often called the articles of incorporation, the charter provides the basics of the company: the name, the address, the purpose of the business and so on. The articles of incorporation typically must describe the new corporation's stock structure – specifically, what kinds of stock it will distribute to its owners and the total number of shares it can make available. That number is the company's authorized shares.

Issued shares

Issued stock represents shares that the company has actually sold. A company can "issue" a share of stock only once. It sells the share to an investor, who can then sell it to someone else. The vast majority of transactions in a company's stock don't involve the company at all. It's just one investor selling already issued stock to another.

Treasury shares

Companies can buy back their own shares, and these shares are known as treasury shares, reports Ready Ratios.

However, when they do so, those treasury shares remain counted as "issued," because the company holds them and can resell them later on. For a small, closely held corporation, all issued shares might be in the hands of their original owners – even members of the same family, or a single individual.

Outstanding shares

Outstanding" stock refers to shares that have been issued and remain in the public's hands. It's simply the number of issued shares minus the number that the company has bought back and is currently holding. Shares held by the company itself are called treasury stock. Those shares have no voting rights.