when a company issues a stock dividend, what happens on the BS? I’m trying to see how D/E and current ratio will be affected. Thanks
cash down…retained earnings down
this is incorrect i believe. cash does not get affected
nothing happens, except your o/s shares have increased which caused dilution.
For small stock dividends (< 20%), the stock dividend is paid for from retained earnings, so retained earnings goes down by full market price of the stock dividend, common stock goes up by by amount of dividend at par value, and additional paid in capital increases by the amount above par. For large stock dividends (> 20%), the stock dividend is paid for from retained earnings, so retained earnings goes down by the par value of the stock dividend, common stock goes up by by amount of dividend at par value, while additional paid in capital is not affected.
Think about it, guys and gals - what does a stock dividend have to do with cash? [The rest of this was a function of my drunken-ness and was incorrect]
sorry should have elaborated more on my post…
nevermind read ali, read!
Dreary, where did you see that?
It’s there somewhere (I don’t really recall exactly where), but it was also in L1, and you can see it pop up in many questions. Can someone point to an exact place in CFAI?