Which of the Following Statements Is Most Correct

question 18

Multiple Choice

Which of the following statements is most correct?

• A) If a company wants to issue new shares of common stock and also wants to implement a dividend reinvestment plan, then it should implement a new-stock dividend reinvestment plan, rather than an open-market purchase plan.
• B) If a company undertakes a 3-for-1 stock split, then the number of shares outstanding should fall, and the stock price should rise.
• C) If a company wants to reduce its debt ratio, then it should repurchase some of its common stock.
• D) Answers a and c are correct.
• E) Answers b and c are correct.

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Definitions:

Market Price

The current price at which an asset or service can be bought or sold in a open market.

Variable Costs

Variable costs are those expenses that change in proportion to the volume of goods or services that a business produces.

Cost Driver

A factor that influences or contributes to the expense of certain business operations or activities.

Support Department

Units within an organization that provide essential services or assistance to revenue-generating departments but do not directly generate revenue themselves.