BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -Are Dividends Part of Stockholder Equity? Dividends are not specifically part of stockholder equity, but the payout of cash dividends reduces the amount of stockholder equity on a company’s balance sheet. This is so because cash dividends are paid out of retained earnings, which directly reduces stockholder equity.

Detailed explanation-2: -Dividends are included in the calculation of shareholders’ equity. They are subtracted from cumulative retained earnings and current-year net income to arrive at the retained earnings for the current year.

Detailed explanation-3: -Stock dividends have no effect on the total amount of stockholders’ equity or on net assets. They merely decrease retained earnings and increase paid-in capital by an equal amount. Immediately after the distribution of a stock dividend, each share of similar stock has a lower book value per share.

Detailed explanation-4: -If a company pays stock dividends, the dividends reduce the company’s retained earnings and increase the common stock account. Stock dividends do not result in asset changes to the balance sheet but rather affect only the equity side by reallocating part of the retained earnings to the common stock account.