Why Does a Company Split Its Stock

question 69

Multiple Choice

Why does a company split its stock?

• A) The stock is trading at a low price, and the company wants to increase its stock value.
• B) It wants fewer shares outstanding.
• C) The stock is trading at a high price, and the company wants to bring the price in line with a theoretical ideal range.
• D) It wants the total market capitalization to be lower than the current level.
• E) The company wants to guarantee that the stock price will increase.

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Definitions:

Nontariff Barrier

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Forum Selection Clause

A provision in a contract that specifies which court or jurisdiction will resolve any disputes that arise under the contract.

Franchise Agreement

A legal, binding contract between a franchisor and franchisee, outlining the terms and conditions for operating a franchised business.