What Is the Most Likely Effect of a Stock Split

question 3

Multiple Choice

What is the most likely effect of a stock split on the par value per share and the number of shares outstanding? Par Value Number of shares
Per share outstanding

• A) Decrease Increase
• B) Decrease No effect
• C) Increase Increase
• D) No effect No effect

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Definitions:

Long-Term Liabilities

Financial obligations of a business that are due more than one year in the future, such as bonds payable, long-term lease obligations, and pension liabilities.

Times Interest Earned Ratio

A financial metric measuring a company's ability to meet its debt obligations by comparing its income before interest and taxes to its interest expenses.

Income Statement

A financial report that shows a company's revenue, expenses, and profits over a specific period.

Present Value

The current value of a future sum of money or stream of cash flows given a specified rate of return, crucial in discounting and investment decision making.