-Refer to Lakeshore Industries

question 178

Multiple Choice

-Refer to Lakeshore Industries. What is the effect of a 2-for-1 stock split if the market value of the common stock is $20 per share at the time the stock split is declared?

• A)A stock split has no impact on any of the stockholders' equity account balances.
• B)Total stockholders' equity increases $750,000.
• C)Cash increases $750,000.
• D)$1,500,000 of retained earnings is transferred to the capital stock accounts.

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Definitions:

Contribution Margin Ratio

A financial metric indicating the portion of sales revenue that exceeds variable costs and contributes to covering fixed costs and generating profit.

Total Sales Revenue

The total income generated from selling goods or services before any expenses are subtracted.

Selling Price

The amount of money for which a product or service is sold to the customer, including all applicable costs and markup.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the proportion of fixed versus variable costs.