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.

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Definitions:

Economic Gain

The increase in wealth or resources resulting from the profitable activities of individuals or businesses.

Self-interest

The consideration of one's own advantages or benefits in decision making or behavior.

Productivity

The measure of efficiency of a person, machine, factory, system, etc., in converting inputs into useful outputs.

Scientific Management

A theory of management that analyzes and synthesizes workflows, aiming to improve economic efficiency, especially labor productivity, by scientific means.