Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. intercontinental clothing distributors has paid ca

Intercontinental Clothing Distributors has paid cash dividends every year since the company was founded in...

90.2K

Verified Solution

Question

Accounting

Intercontinental Clothing Distributors has paid cash dividends every year since the company was founded in 1990. The dividends have steadily increased from $0.05 per share to the latest dividend declaration of $1.00 per share. The board of directors is eager to continue this trend despite the fact that earnings fell significantly during the recent quarter. The chair of the board proposes a solution. He suggests a 5% stock dividend in lieu of a cash dividend, to be accompanied by the following press announcement: In place of our regular $1.00 per share cash dividend, Intercontinental will distribute a 5% stock dividend on its common shares, currently trading at $20 per share. Changing the form of the dividend will permit the company to direct available cash resources to the modernization of facilities and other capital improvements.

Is a 5% stock dividend on shares trading at $20 per share equivalent to a $1.00 per share cash dividend? Is the chairs suggestion ethical?

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students