Stock splits increase the number of outstanding shares without changing the total value of the company. This means that the pie is simply divided into smaller slices. As a result, the value per share decreases, but the total value of the investor's holdings remains the same. Therefore, a stock split does not affect the retained earnings account or contributed capital account.

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Stock Splits

Question 44

Multiple Choice

Stock splits:

A) decrease the retained earnings account
B) increase the number of outstanding shares
C) increase the contributed capital account
D) all of the above

Correct Answer: