The Primary Purpose of a Stock Split Is to

question 105

Multiple Choice

The primary purpose of a stock split is to

• A) increase paid-in capital
• B) reduce the market price of the stock per share
• C) increase the market price of the stock per share
• D) increase retained earnings

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Definitions:

Fixed Production Costs

Expenses that do not fluctuate with the level of production output, such as depreciation on factory buildings and salaries of certain managers.

Depreciation

An accounting method of allocating the cost of a tangible asset over its useful life.

Period Cost

Costs that are expensed in the period they are incurred and are not directly tied to production activity.

Indirect Costs

Costs that cannot be directly linked to the production or sale of a specific product or service, such as administration, rent, and utilities.