Question

How will a company's total current liabilities and total stockholders' equity be affected by the declaration of a stock dividend? (assume the stock dividend is distributed at a later date.)?

Answer 1

Stockholders' equity, also called owners' equity, is the surplus of a company's assets over its liabilities. Cash dividends reduce stockholders' equity by distributing excess cash to shareholders. Stock dividends distribute additional shares to shareholders and do not affect the balance of stockholders' equity.