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 is a good analogy for a stock split?

Cutting a pizza into more slices without changing the total amount of pizza

Adding more toppings to a pizza to increase its size

Buying a second pizza to double the total amount

Eating half of a pizza and saving the rest for later

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Verified step by step guidance

Understand the concept of a stock split: A stock split increases the number of shares outstanding by dividing each existing share into multiple shares, while the total value of the company and the shareholder's ownership percentage remain unchanged.

Analyze the analogy options provided in the problem to determine which one best represents the concept of a stock split.

Option 1: 'Cutting a pizza into more slices without changing the total amount of pizza' aligns with the idea of a stock split because the total value (pizza) remains the same, but it is divided into smaller parts (slices).

Option 2: 'Adding more toppings to a pizza to increase its size' does not represent a stock split because it implies an increase in value or size, which does not occur in a stock split.

Option 3: 'Buying a second pizza to double the total amount' and Option 4: 'Eating half of a pizza and saving the rest for later' also do not align with the concept of a stock split, as they imply changes in the total value or consumption, which are unrelated to a stock split.