Ina Reverse Stock Split, ________________

question 354

Multiple Choice

Ina reverse stock split, ________________.

• A) The number of shares outstanding increases, and owners' equity decreases.
• B) The firm buys back existing shares of stock on the open market.
• C) The firm sells new shares of stock on the open market.
• D) The number of shares outstanding decreases, but owners' equity is unchanged.
• E) Shareholders make a cash payment to the firm, just the opposite of a cash dividend.

---

Definitions:

Bankers' Acceptances

Short-term debt instruments issued by a company that is guaranteed by a commercial bank, commonly used in international trade.

Brokers' Calls

The interest rate charged by banks on loans extended to brokerage firms for the purpose of funding clients' margin accounts.

Residual Claimant

An individual or entity entitled to a share of a company's assets only after all debts and other obligations have been met in the event of liquidation.

Unlimited Liability

A legal structure wherein the business owners are personally responsible for all the debts and liabilities of the business.