A Company Issued Additional Shares of Stock

question 148

Multiple Choice

A company issued additional shares of stock. Which of the following is true with regard to the effect of the stock issuance transaction on the company's ratio computations?

• A)Earnings per share decreased.
• B)The debt-to-equity ratio increased.
• C)The asset turnover ratio decreased.
• D)Return on equity remained unchanged.

---

Definitions:

Net Income

The total earnings of a company after deducting all costs and expenses from revenue, indicating the company's profitability.

Liquidation

The process of closing a business by selling its assets to pay off its liabilities, with any remaining proceeds distributed to shareholders or owners.

Income Statement

A financial statement that shows a company's revenues, expenses, and net income over a specific period of time.

Balance Sheet

A financial statement that shows a company's assets, liabilities, and shareholders’ equity at a specific point in time, providing insights into its financial condition.