If a Corporation Declares a 2-For-1 Stock Split, Which of the Following

question 82

Multiple Choice

If a corporation declares a 2-for-1 stock split, which of the following is true?

• A) The amount of stockholders' equity doubles as a result of the split.
• B) The amount of capital stock doubles as a result of the split.
• C) The price of each share will be doubled as a result of the split.
• D) A stockholder who previously held 100 shares will have 200 shares after the split.

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Definitions:

Return On Equity

An assessment of a firm's efficiency in producing profit from its shareholders' investments.

Financial Leverage

The use of borrowed funds ("debt") to amplify returns from an investment or project.

Price Earnings Ratio

A financial metric comparing the current price of a company's stock to its earnings per share to assess whether the stock is undervalued or overvalued.

Earnings Per Share

A financial ratio that measures the amount of a company's profit allocated to each outstanding share of common stock.