Final answer:
Distributions of stock to current shareholders of a corporation are called stock dividends, which is a type of dividend paid in the form of additional shares. Shareholders receive dividends as a form of return, and decisions on issuing dividends are made by private and public companies based on various strategic considerations.
Step-by-step explanation:
The correct answer to the student's question is B. stock dividend. Distributions of stock to current shareholders of a corporation are called stock dividends. A stock dividend is a payment made in the form of additional shares rather than a cash payout. Companies may decide to distribute this type of dividend for various reasons, including the desire to conserve cash or to reinvest profits back into the company for growth and expansion.
Shareholders typically have the benefit of receiving dividends as a form of return on their investment. Private and public companies make decisions on whether to issue dividends based on different considerations, with public company decisions often influenced by shareholder expectations and market perceptions.
When a company issues a dividend, it is sharing part of its earnings with its shareholders. Dividends can be issued in various forms, such as cash dividends, property dividends, or stock dividends. Stock dividends provide an alternative to cash payouts by giving shareholders more shares in the company, effectively diluting the existing shares, but potentially leading to future capital gains if the company's value increases.