A Stock Split

question 266

Multiple Choice

A stock split:

• A) Increases the total value of the common stock account.
• B) Decreases the value of the retained earnings account.
• C) Does not affect the total value of any of the equity accounts.
• D) Increases the value of the retained earnings account.
• E) Decreases the total owners' equity on the balance sheet.

---

Definitions:

Weight of Preferred Stock

The proportion of preferred stock in a company’s capital structure, used in calculating the cost of capital or investment risk.

Weighted Average Cost of Capital

A calculation that reflects the cost of a company's capital, including equity and debt, weighted by their proportion in the total capital structure.

Bond Issue

The process by which a company, government, or other organization raises funds by issuing bonds to investors, who essentially lend money to the issuer in exchange for periodic interest payments and the return of principal at maturity.

Weight of Debt

A component of a firm's capital structure that quantifies the proportion of total capital represented by debt.