CB Corporation Issued a 2 for 1 Stock Split

question 12

Multiple Choice

CB Corporation issued a 2 for 1 stock split.Which of the following is NOT a true statement concerning the effect of the split?

• A) The number of shares outstanding is increased.
• B) There is a transfer of retained earnings to contributed capital.
• C) A proportionate reduction in the par value per share occurs.
• D) There is a continuation of retained earnings with no reduction in its balance.

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Definitions:

Debentures

A type of long-term debt instrument used by corporations and governments to raise funds, not secured by physical assets or collateral.

Convertible Participating Bond

A type of bond that gives the holder the right to convert it into a specified number of shares of the issuing company and to participate in earnings beyond a specified amount.

Corporate Earnings

The profit a company makes after deducting its operating expenses and taxes, indicative of its financial health.

Adequacy

The sufficiency or appropriateness of something to fulfill a specific need, requirement, or condition.