Stock Dividends, Stock Splits and Reverse Splits Essays

In the open market share repurchase, the firm may or may not declare the repurchase. Depending on the market condition and the firm’s position in the industry, the firm can decide when and how many

similar to that of share buyback, the number of new shares outstanding will reduce; thus,

Green, Inc. had 200,000 shares of common stock outstanding before a stock split occurred and 800,000 shares outstanding after the stock split. The stock split

2. Companies buy back shares on the open market over an extended period of time.

The majority of share divisions are mostly two for one split. This implies the stockholders get two stocks and shares for the price of one share. In case the share cost $10, the stockholder will get 2 $5 shares instead.

When a company generates a profit, management has one of two choices: They can either pay it out to shareholders as a cash dividend, or retain the earnings and reinvest them in the business.

Since firms incur the re-purchase option by offering $20 cash for each stock bought back, the number of outstanding shares will be reduced. The Earnings per share will increase leading to an increased stock price.

The purpose of this case is to have students examine dividend policy--cash dividends, stock splits, and stock dividends--from the viewpoint of its effect on corporate share prices.

Share price being determined by the Total Market Value of Equity divided by the current number of shares outstanding. As the firm increases its leverage, it buys back shares, as well as reduces its equity. The rate that equity decreases is smaller than that of shares being bought back, thus causing an increase in share price.

In practice, dividend policy will be affected by taxes as tax rates for different categories of investors will differ. Also, a firm’s dividend policy is perceived by the financial markets to be a signaling mechanism. A cut back in dividends may signify that the firm perceives tough

First, a large share repurchase will significantly increase shareholders’ percentage ownership of BKI. BKI has been under levered for decades. The company acquisitions of several small manufacturers made shareholders’ equity be diluted even more. In other words, shareholders, especially the main shareholders in Blaine’s board, are paying for BKI’s over-liquidity. This share repurchase will not only give the board more flexibility to allot dividends, but will lead to a stable development of BKI’s business in the long run.

7. Hypothesis Testing: The formulated hypothesis in the study that whether abnormal returns are generated by stock split was tested by conducting paired sample t test using SPSS for the sample of companies for period ranging from -60 to +60 days. The two variables compared were the normal returns and the expected returns ( based on BSE returns)

MCI’s estimated EPS for 1996 is $3.75. When the number of shares declines to 608.93 after repurchase, EPS would rise. Assuming the earnings forecast for 1996 materializes, EPS would rise to $1.96. This is calculated using the formula below.

The dividends that stockholders receive and the value of their stock shares depend on the business’s profit performance. Managers’ jobs depend on living up to the business’s profit goals.

After the company has been approved the new shareholders have to elect a board of directors whom are going to run the company on their behalf. The directors are been elected to do the day to day running of a company, and because of their expertise and skills. After the broad of directors are elected of the shareholders they take over they responsible of the running of the company. Each share equals one vote, but in most cases small numbers of shares have little to say as in most cases large investors who hold the majority of shares have the power and saying in the company. The number of shares in one company, which equals 100% differ from company to company, and the price per share differ as well. There are two different types of companies: private limited companies and public limited companies. Shares cannot be traded without the approval of the board of directors in a private limited company. The shares are also only sold to friends or family member with a prior agreement and not to the general public. Normally a private limited company has the letters “Ltd” after its name, On the other hand a public limited company is selling their stocks on the Stock Market to the general public. Public limited companies sometimes carry the letters “PLC” after its name. The value of a company is all shares added together and have to equal 100% of the shares. This is how the value of a company constantly is change, as a result