Which of the Following Statements Accurately Explains Why the Board

question 11

Multiple Choice

Which of the following statements accurately explains why the board of directors of a company that is facing financial difficulties might issue a 2-for-1 stock split rather than declare a 100% stock dividend?

• A)A stock split would not reduce the market price per share,whereas a stock dividend would.
• B)A stock split would reduce the market price per share,whereas a stock dividend would not.
• C)A stock split would increase total shareholders' equity,whereas a stock dividend would not.
• D)A stock split would not reduce retained earnings,whereas a stock dividend would.

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Definitions:

Capital Budgeting Process

The procedure businesses follow to evaluate potential major projects or investments, through stages from proposal generation to project approval.

Favorably Biased

A tendency to present information in a manner that is more positive or beneficial than is justified by the facts.

Annual Depreciation Expense

The portion of the cost of a fixed asset that is expensed each year of its useful life, representing wear and tear, decay, or decrease in value.

Cash Inflows

Refers to the money received by a business from its operational, investment, and financing activities.