The Purpose of a Reverse Stock Split Is to

question 68

Multiple Choice

The purpose of a reverse stock split is to

• A) increase the dividend.
• B) increase the price of stock.
• C) issue additional shares.
• D) reduce trading activity.

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Definitions:

Compensatory Stock Option

An employee benefit option that gives the right to purchase company stock at a discount.

Compensation Expense

The total amount of cash and non-cash payments that businesses must make to employees, including salaries, bonuses, and benefits.

Paid-in Capital

The total amount of cash and other assets received from shareholders in exchange for stock, including amounts above the nominal value (or par value) of the shares.

Historical Cost Principle

An accounting principle that states assets should be recorded and reported at their original purchase price.