Which of the Following Statements About a 2 for 1

question 49

Multiple Choice

Which of the following statements about a 2 for 1 stock split is not true?

• A) A shareholder with 200 shares before the split owns 400 shares after the split.
• B) Legal capital per share is reduced to half of what it was before the split.
• C) Total share capital increases.
• D) The market value of the share will probably decrease.

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Definitions:

Dividend Policy

A company's approach to distributing profits back to its shareholders either in the form of cash payments or shares of stock.

Firm Value

The total value of a company, determined by its assets, earnings, cash flow, and market perception.

Market Imperfections

Occur when conditions for perfect market competition are not met, leading to inefficiencies such as monopolies or information asymmetries.

Stock Dividend

A dividend payment made in the form of additional shares rather than a cash payout, to shareholders.