Ok well in my accounting class, I'm on the chapter about stockholders equity (the class isn't there yet, but I like accounting so I thought I would skip ahead so I can be more prepared when we do get there).

There are 2 concepts regarding stockholders equity that I can't understand no matter how hard I try. One of those concepts is the par value of common stock. I understand that its like the face value of the stock, but its not like the stock is being sold at this price or anything so I don't understand what purpose it serves. I've read that its an outdated concept, but I would still like to understand it. I think its used to explain what the corporation was worth when it first started out but something tells me I'm dead wrong.

One other thing I don't understand is stock dividends. I understand stock splits and the way they can make stocks more affordable by keeping the stocks at low prices, but I don't understand stock dividends. I understand that they increase the number of shares of stock owned by stockholders, but if the value of each share is lowered as well then what's the point? The stockholders do have more shares, but since the value of each share is lowered, they are no better of then they were before. Cash dividends is an obvious and easy to understand concept, but stock dividends are confusing me. I also don't understand the journal entries associated with the stock dividends, like why retained earnings and paid-in-capital are effected.

Can anybody please help me and explain these 2 concepts as clear and concise as possible? Like please explain these concepts in as much detail as you can. To me there is no such thing as to much detail, you can make your posts as long as you wish as long as it will help me understand this better lol

Thank you

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Why would you keep a stock longterm?

Besides banking on its value going up, you have dividends. You realize people invest in companies to get something back right? Not all companies offer dividends, and its not always on a cash basis. Sometimes you get more stocks as dividends.

Where do dividends come from? Basically they're from profit, if you don't retain your profit you throw it out to your shareholders as dividends.