MFIN 8807 Study Guide - Final Guide: Stock Split, Capital Requirement, Financial Plan
Document Summary
Stock dividends and stock splits: distributions of additional shares to a firm"s stockholders. The shareholder is given a fixed number of new shares for each one held (ie. in a two-for-one stock split, each investor would receive one additional share for each share already held. The investor ends up with two shares rather than one) The announcement of a stock split does result in a rise in the market price of the stock, even though investors are aware that the company"s business is not affected. Managers aim for smooth dividends and increase dividends gradually as earnings grow. Percentage of sales models: planning model in which sales forecasts are the driving variable and most other variables are proportional to sales. Balancing item: variable that adjusts to maintain the consistency of a financial plan (right hand of balance sheet increases and both debt and equity increases in the same proportion).
