Georgia Assessments for the Certification of Educators GACE Practice Test

Which of the following is not true of stock dividends?

1. They are offered voluntarily by companies in order to make their stock more attractive

2. They are usually taxable

3. Their amount and frequency are determined directly by shareholders at large

4. They may be discontinued or reduced at any time

The correct answer is: They are offered voluntarily by companies in order to make their stock more attractive

Stock dividends are dividends that are distributed by a company to its shareholders, resulting in additional shares of stock being issued. A stock dividend does not involve payment of cash by the issuing company, so it is incorrect to say that it is usually taxable. While stock dividends are often used to make a company's stock more attractive and can be discontinued or reduced at any time by the company, they are not determined directly by shareholders at large. Therefore, the statement that stock dividends are determined directly by shareholders at large is incorrect.