Asked by Abhishek Prodduturi on May 09, 2024
Verified
Which of the following statements is not true about a 2-for-1 split?
A) Par value per share is reduced to half of what it was before the split.
B) Total contributed capital increases.
C) The market price will probably decrease.
D) A stockholder with 10 shares before the split owns 20 shares after the split.
Par Value
A nominal value assigned to a stock or bond, representing its face value rather than its market value.
Stock Split
This action increases the number of shares of a corporation by issuing more shares to current shareholders, which typically results in a decrease in the per-share price, making the stock more accessible to a wider range of investors.
- Identify the objectives and impacts of stock splits and stock dividends on both the par value and market value, in addition to their influence on shareholders' equity.
Verified Answer
AJ
Ashley JeffersonMay 13, 2024
Final Answer :
B
Explanation :
Total contributed capital remains unchanged in a stock split. A 2-for-1 split doubles the number of shares but does not affect the total contributed capital; it merely divides the existing capital into more shares, reducing the par value per share and potentially the market price per share, while doubling the number of shares owned by each shareholder.
Learning Objectives
- Identify the objectives and impacts of stock splits and stock dividends on both the par value and market value, in addition to their influence on shareholders' equity.