When a Company Splits Its Common Stock 3 for 1

question 11

Multiple Choice

When a company splits its common stock 3 for 1:

• A)total paid-in capital increases by a factor of 3.
• B)retained earnings is decreased by the market value of the shares issued.
• C)the market value of the company's stock normally falls by two-thirds.
• D)the stockholders are assured of receiving larger cash dividends.

---

Definitions:

Portfolio Return

The overall gain or loss experienced by an investment portfolio over a specified period.

Stock Returns

The gain or loss made on an investment in shares, generally represented as a percentage of the investment’s initial cost.

Business Cycle

The fluctuation of economic activity that an economy experiences over a period of time, marked by phases of expansion and contraction.

Interest Rate Fluctuations

Variations in the interest rate over time, which can affect the value of investments, loans, and savings.