Laura J Set Up a Part-Time Business 'Speedy Window Cleaning

question 37

Multiple Choice

Laura J set up a part-time business 'Speedy Window Cleaning' by depositing
$6000 into a business bank account. Which of the following represents the effect of this transaction on the accounting equation?

• A) Increase in assets of $6000; increase in equity of $6000.
• B) Increase in assets of $6000; decrease in equity of $6000.
• C) Increase in assets of $6000; increase in liabilities of $6000.
• D) Decrease in assets of $6000; increase in equity of $6000.

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Definitions:

Total Market Value

The combined market price or value of all of a company's outstanding shares, reflecting its overall market capitalization.

Post-Split Price

The new stock price following a stock split, adjusted to reflect the increase in the number of shares without altering the company's market capitalization.

Residual Dividend Policy

A strategy where dividends paid to shareholders are based on earnings left after all operational and expansion financing needs are met.

Target Capital Structure

The mix of debt, preferred stock, and common equity that a company aims to hold to minimize its cost of capital.