Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Stock Splits

Financial Accounting

12. Stockholders' Equity

Stock Splits

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Multiple Choice

Which of the following statements is FALSE regarding stock splits?

A stock split decreases the par value per share.

A stock split does not affect the total market value of shareholders' equity.

A stock split increases the number of shares outstanding.

A stock split increases the total equity of a company.

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Verified step by step guidance

Understand the concept of a stock split: A stock split is a corporate action where a company increases the number of its outstanding shares by issuing more shares to current shareholders. This is done without changing the total value of shareholders' equity or the company's market capitalization.

Analyze the first statement: 'A stock split decreases the par value per share.' This is true because when the number of shares increases, the par value per share is proportionally reduced to maintain the same total par value of equity.

Analyze the second statement: 'A stock split does not affect the total market value of shareholders' equity.' This is true because a stock split only changes the number of shares and their par value, not the total equity or market value of the company.

Analyze the third statement: 'A stock split increases the number of shares outstanding.' This is true because the primary purpose of a stock split is to increase the number of shares available in the market.

Analyze the fourth statement: 'A stock split increases the total equity of a company.' This is false because a stock split does not change the total equity of the company; it only redistributes the equity across a larger number of shares.