Please respond to the following:

• Differentiate between a stock split and a stock dividend. As the financial manager for Tesla Corporation, which would you recommend for Tesla? Provide support for your rationale.

Be sure to respond to at least one of your classmates’posts.

Hello Classmates & Professor:

Differentiating Between a Stock Split and a Stock Dividend:

Stock dividend is a distribution of additional shares of a company’s stock to existing shareholders whereas a stock split is done to divide the existing. On declaring stock dividends, there is no change in face value of shares. In contrast, in a stock split, the face value of the share decreases. Stock dividend and stock split are two aspects that are confused easily due to many similarities between them. Both result in an increase in the number of outstanding shares in the company without affecting the total market value. The key difference between stock dividend and stock split is that while stock dividend allocates a number of shares free of charge based on the prevailing share ownership, stock split is a method where existing shares are divided into multiple units with the intention of expanding the number of shares.

Stock dividend apportions a number of shares free of charge based on the current share ownership. Stock split divides the existing shares into multiple shares with the intention of expanding the number of shares. Stock dividend is usually offered in situations where the company is unable to pay a cash dividend. Stock splits are done to improve the liquidity of the shares. Stock dividends are only available to existing shareholders. Both existing shareholders and potential investors can benefit since share prices are reduce

Both stock dividend and stock split results in an increase in the total number of shares outstanding. The main difference between stock dividend and stock split mainly depends on the purpose they are issued for, as both result in similar outcomes. Stock dividends is a suitable option for short term cash limitations; however, this may not be liked by many investors since the majority expect regular incomes that only cash dividends can provide.

As the financial manager for Telsa Corporation, I would recommend a stock split for the following reasons: Accessibility to Retail Investors: Telsa’s stock has a history of trading at a high per-share price, which can deter retail investors which limited capital from investing. A stock split would reduce the per-share price, making Telsa’s stock more accessible to a broader range of investors. This can potentially increase demand and trading activity. Positive Market Sentiment: Can attract more investors, potentially leading to short-term price appreciation. Liquidity Enhancement: Higher liquidity can reduce trading spreads and enhance overall market efficiency. No cash outflow: Importantly, a stock split does not involve any cash outflow, preserving Telsa’s cash for strategic investments or operational needs.