Final answer:
Additional shares issued to existing owners without an exchange of cash may be in the form of stock dividends. Stock dividends are a way for companies to reward shareholders by increasing their number of shares without the need for cash outlay, which is typically decided upon by the board of directors.
Step-by-step explanation:
Additional shares issued to existing owners without an exchange of cash may be in the form of stock dividends. Companies can decide to offer stock dividends to shareholders, which represents a distribution of additional shares rather than cash. This can occur when a company wants to reward its shareholders but may wish to retain cash for other purposes, such as reinvestment into the company's growth. When stock dividends are issued, each shareholder receives a proportion of additional shares based on the amount they currently hold, and this increases the number of shares they own in the company. As a result, the value of each individual share may decrease, but the overall value of the shareholder’s equity remains the same.
For instance, if a company declares a 10% stock dividend, a shareholder owning 100 shares will receive an additional 10 shares, increasing their total holdings to 110 shares. The decision to issue additional shares is often made by the company's board of directors and reflects a strategy to reinvest profits to further grow the company without raising additional funds through debt or external financing.