When a Firm Implements a Stock Split, What Effect Does

question 46

Multiple Choice

When a firm implements a stock split, what effect does the split have on the earnings per share (EPS) of the firm?

• A)EPS will rise.
• B)EPS will remain the same.
• C)EPS will fall.
• D)EPS will rise initially before dropping.
• E)EPS will fall initially before rising to the old level.

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Definitions:

Competitive Market

A market structure characterized by a large number of buyers and sellers, where no single entity can influence the market price.

Positive Profits

Financial gains that exceed the costs and expenditures incurred in generating revenue.

Demand Fluctuates

The variability in consumer desire to purchase goods or services over time, often affected by seasons, trends, or economic conditions.

Stocks

Shares of ownership in a company that represent a claim on the company's earnings and assets.