Which of the Following Statements Is Correct

question 213

Multiple Choice

Which of the following statements is correct?

• A)Stock splits and stock dividends both reduce the market price of a share,but only stock splits reduce the par value of a share.
• B)Stock splits and stock dividends both reduce the market price of a share and the par value of a share.
• C)Stock splits and stock dividends both reduce the market price of a share,but only stock dividends reduce the par value of a share.
• D)Stock splits and stock dividends both reduce the market price of a share and reduce Retained Earnings.

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Definitions:

Operating Leverage

A measure of how much a company can increase its operating income by increasing revenue, indicating the ratio of fixed costs to variable costs.

EBIT

Earnings Before Interest and Taxes; a measure of a company's profitability that focuses on earnings generated from its core operations before the impact of financial and tax activities.

Business Risk

The exposure a company or investor faces due to uncertainties in the market or industry that could affect its profitability.

Fixed Assets Turnover Ratio

A financial metric that measures a company's ability to generate sales from its fixed assets, such as property, plant, and equipment.