A Company May Declare a Stock Split To

question 39

Multiple Choice

A company may declare a stock split to:

• A)reduce retained earnings.
• B)avoid paying a cash dividend.
• C)reduce total equity.
• D)decrease the market value of the stock.

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Definitions:

Call Option

An economic agreement that provides the bearer the option, without the necessity, to purchase a share, bond, commodity, or different asset at an agreed-upon price during a determined timeframe.

Derivative Security

A financial security whose value is determined by or derived from an underlying asset or group of assets, such as stocks, bonds, commodities, or market indices.

Fixed Price

A contractually agreed-upon price for goods or services that is not subject to any changes in cost.

Risk-Free Rate

The theoretical rate of return on an investment with zero risk, often represented by the yield on government securities.