The Shareholders' Equity Section of the Balance Sheet of the XYZ

question 68

Multiple Choice

The shareholders' equity section of the balance sheet of the XYZ Corp. is as follows: $\begin{array}{ll}\text { Common stock } & \$ 20,000,000 \\\text { Retained earnings } & \$ 176,000,000 \\\text { Total } & \$ 196,000,000\end{array}$
If the company now splits its stock 5-for-1, which of the following is correct?

• A) the common stock section will increase to $100,000,000
• B) the market price per share will probably remain unchanged
• C) the book value per share will decline to $17.60
• D) the number of shares outstanding will increase

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Definitions:

Marginal Tax Rate

The rate at which the last dollar of income is taxed, indicating how much tax will be paid on an additional dollar of income.

Federal Taxes

Mandatory financial charges collected by the federal government to fund public services and projects.

State Taxes

Taxes imposed by state governments on income, sales, property, and other activities within their jurisdiction.

Federal Government

The national government of a federated state, which shares sovereignty with the individual state or provincial governments.