Financial Accounting?
Question:
Par Value per ShareBook Value per Share
a.IncreaseDecrease
b.No effectIncrease
c.DecreaseDecrease
d.No effectDecrease
Answer:
The answer is D.
But remember one thing, in "real life" not theory, both stock dividends and stock splits appear to send positive signals to the market about the company and often result in positive stock price REACTIONS.
I dont think it has any effect on the par value, b/c that's determined by the underwriter ...'xyz company issued 100,000 of $0.01 common stock.' that cant change b/c of a dividend.
Book value, i'd say it decreases and the reason i'm thinking of is dilution through reinvestment and b/c typically when a company announces a dividend it is declared for all holders on a future date, the result is that many investors buy the stock on the days leading up to the dividend cut off date diluting the shares --- but hopefully running up the price a bit so its a wash for the investor but probably decreases the book value? JUst a guess.
D.
It's D. Par value won't change, and book value goes down because there is now loss cash per share.
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