Game Guys Announced a 2-For-1 Common Stock Split for Investors

question 40

Multiple Choice

Game Guys announced a 2-for-1 common stock split for investors on record. Which of the following will occur?

• A) The stock price will increase to reflect the value of two shares for every one share.
• B) Each share will be worth ½ of its previous value, but shareholders' total value of Game Guys will remain the same.
• C) The value of Game Guys common stock will remain the same, for a short period of time, and then experience a guaranteed growth spurt.
• D) The shareholders will sell their shares immediately after the split and take their capital gains, as well as provide others an opportunity to invest in Game Guys.

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Definitions:

Acid-Test Ratio

A liquidity ratio that measures a company's ability to pay off its current liabilities with its quick assets.

Quick Ratio

A liquidity ratio that measures a company's ability to cover its short-term obligations with its most liquid assets, excluding inventory.

Wholesaler

A wholesaler is an intermediary entity in the distribution process that buys bulk quantities of goods from manufacturers and sells them to retailers or professional buyers.

Consumers

Individuals or groups that purchase goods and services for personal use.