15% stock dividend will raise the amount of shares outstanding by 15% to 1,380,000 because every shareholder will receive a fractional share of .15 for each share owned. The dollar amount of the capital stock account will not change, but the market price of the stock will theoretically adjust downward by 15% simply because there are more shares to divide up less net assets. The price should adjust to $35~. ($40 / 1.15 = $34.78)

4:3 stock split will increase the shares outstanding by 33% to 1,600,000 because each shareholder will receive one more share for each 3 shares owned. The dollar amount of the capital stock account will not change, but the market price of the stock will theoretically adjust downward by 33% simply because there are more shares to divide up the net equity of the company.

1:3 stock split (known as a reverse) will decrease the shares outstanding by 67% to 400,000. If you happen to own stock in this company, it would be best to sell now. This is an indicator of a shrinking company. Same as above for the market adjustment after the news.

Return on Equity (ROE, Return on average common equity) measures the rate of return on the ownership interest (shareholders' equity) of the common stock owners. ROE is viewed as one of the most important financial ratios. It measures a firm's efficiency at generating profits from every dollar of net assets, and shows how well a company uses investment dollars to generate earnings growth. ROE is equal to a fiscal year's net income (after preferred stock dividends but before common stock dividends) divided by total equity (excluding preferred shares), expressed as a percentage.

ROE = net income/ average stockholder's equity

http://en.wikipedia.org/wiki/Return_on_equity

If both Hudson and Baldwin has the same net income, but the ROE is different, then using the formula above, it is obvious that stockholders' equity is quite different between the two. Plug in the amounts to test for the unknown. Balwin has a stockholders' equity of $5,000,000.