Asked by Abdullah Elalami on May 04, 2024
Verified
A stock split results in the reduction of the par or stated value per share and a proportionate increase in the number of shares outstanding.
Stock Split
An action by a company to divide its existing shares into multiple shares to boost the liquidity of the shares.
Par Value
The nominal value per share of stock as specified in the corporate charter; also, another name for bond principal, or the maturity amount of a bond (in Chapter 10).
Shares Outstanding
The total number of shares of a company held by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders.
- Recognize the effects of stock splits and dividends on company's equity and per share values.
Verified Answer
SL
Sidney LittleMay 09, 2024
Final Answer :
True
Explanation :
A stock split is a corporate action that involves a company dividing its existing shares into multiple shares. The par or stated value per share is reduced, but the total value of the shares remains the same. This results in an increase in the number of shares outstanding. For example, in a 2-for-1 stock split, each shareholder will receive two shares for every one share they currently own, but the value of each share will be halved.
Learning Objectives
- Recognize the effects of stock splits and dividends on company's equity and per share values.