Indicate Whether Each of the Following Statements About Stockholders' Equity

question 45

Short Answer

Indicate whether each of the following statements about stockholders' equity is true or false.
1. A 2-for-1 stock split probably will double the monetary value of an investor's holdings on the date the split takes effect
2. The declaration and distribution of a stock dividend reduces retained earnings
3. The balance in the treasury stock account increases total stockholders' equity
4. If treasury stock that had been acquired by a company for $50 per share is resold for $60 per share, total assets and stockholders' equity will increase
5. Preferred stock of some corporations can be converted into common stock

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Definitions:

Cash Balance Target

A cash balance target is a strategy companies use to maintain an optimal level of cash reserves for operations and unexpected expenses, aiming to balance liquidity with profitability.

Weekly Interest Rate

The interest rate applied to loans, savings, or investments calculated on a weekly basis.

Optimal Initial Cash Balance

Optimal initial cash balance is the ideal amount of cash a business should hold at the start of a period to meet operational needs and minimize costs, considering factors like transaction costs and opportunity costs.

Monthly Standard Deviation

A statistical measure that represents the variability or volatility of an asset's returns over a month.