In a Reverse Stock Split, ________________

question 212

Multiple Choice

In a reverse stock split, ________________.

• A) The number of shares outstanding increases, and owners' equity decreases.
• B) The firm buys back existing shares of stock on the open market.
• C) The firm sells new shares of stock on the open market.
• D) The number of shares outstanding decreases, but owners' equity is unchanged.
• E) Shareholders make a cash payment to the firm, just the opposite of a cash dividend.

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Definitions:

Common Stockholders

Common stockholders are individuals or entities that own shares of common stock in a company, granting them rights to vote on corporate matters and receive dividends.

Authorized Shares

The maximum number of shares that a corporation is legally permitted to issue, as specified in its articles of incorporation.

Issued Shares

The total number of shares that a corporation has legally sold to investors, including those held by the public and the company's officers or insiders.

Outstanding Shares

Outstanding shares refer to the total number of shares of a corporation's stock that are currently owned by all its shareholders, including share blocks held by institutional investors and restricted shares.