In a Reverse Stock Split

question 69

Multiple Choice

In a reverse stock split:

• A) the number of shares outstanding increases and owners' equity decreases.
• B) the firm buys back existing shares of stock on the open market.
• C) the firm sells new shares of stock on the open market.
• D) the number of shares outstanding decreases but owners' equity is unchanged.
• E) shareholders make a cash payment to the firm.

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Definitions:

Long-Run Total Cost

Refers to the total cost incurred by a firm in producing a given output when all inputs, including both fixed and variable costs, are considered over a longer period.

Maximize Profits

A rephrased definition for Profit-Maximizing; aiming to achieve the maximum possible profits through optimal production and sales strategies.

Total Cost

The entire cost of production for a business, including both fixed (unchanging with output) and variable (changing with output) expenses.

Long-Run

A period in economics during which all factors of production and costs are variable, allowing all inputs to be adjusted to change the level of output.