A Feature Common to Both Stock Splits and Stock Dividends

question 77

Multiple Choice

A feature common to both stock splits and stock dividends is

• A)That there is no effect on total stockholders' equity.
• B)A reduction in the contributed capital of a corporation.
• C)A transfer to earned capital of a corporation.
• D)An increase in total liabilities of a corporation.

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Definitions:

Financial Leverage

The action of using debt to magnify the expected return on an investment.

Operating Income

Income from a company's main business activities, excluding deductions for interest and taxes, showing the profitability from core operations.

ROE

Return On Equity, a measure of financial performance calculated by dividing net income by shareholders' equity, indicating how efficiently a company uses investments to generate earnings growth.

EPS

Earnings per share, a company's net profit divided by the number of its outstanding shares, indicating profitability.