All Else Constant, a Reverse Stock Split

question 145

Multiple Choice

All else constant, a reverse stock split:

• A) Increases the number of shares outstanding.
• B) Increases the book value of the firm.
• C) Increases the total market value of the firm.
• D) Decreases the earnings per share.
• E) Increases the market price per share.

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Definitions:

Monopsonist

A situation in the market where a single buyer dominates, possessing substantial control over the pricing of a product or service.

Nominal Wage

The wage paid to workers measured in current dollars, without adjustment for inflation.

Price Level

refers to the average of current prices across the entire spectrum of goods and services produced in the economy, often compared over time to assess inflation.

Real Wage

The purchasing power of wages, considering the effect of inflation, representing the quantity of goods and services that can be bought with those wages.