Which of the Following Statements Regarding Stock Splits Is Incorrect

question 17

Multiple Choice

Which of the following statements regarding stock splits is incorrect?

• A) A stock split increases total owners' equity.
• B) A stock split involves a reduction in the share's issue value.
• C) A stock split decreases the market price of the shares.
• D) A stock split is an increase in the number of authorized, issued, and outstanding shares.

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Definitions:

Fiscal Year

A fiscal year is a 12-month period used for accounting purposes and preparing financial statements, not always coinciding with the calendar year.

FMV

Fair Market Value, the price at which property would sell on the open market between a willing buyer and seller.

Basis

The amount of investment in property for tax purposes, used to calculate the gain or loss on the sale, exchange, or disposition of property.

Corporation

A legal entity owned by shareholders with rights and liabilities separate from those of its owners, and which pays taxes on earnings.