If a corporation declares a 2-for-1 stock split, which of the following is true?

Question

Quizplus · Accepted Answer

When a corporation declares a 2-for-1 stock split, each shareholder receives two shares for every one share they previously owned. This means that the number of shares outstanding is doubled, but the price per share is typically halved to reflect the increase in the number of shares. The overall value of the company in the market remains the same, just distributed over a larger number of shares.
Here's a breakdown of the options:
a. The amount of stockholders' equity is not doubled as a result of the split. The total value of the equity remains the same, but it is now represented by a greater number of shares.
b. The amount of capital stock is not technically doubled; instead, the number of shares representing the capital stock is doubled. The par value per share is usually adjusted so that the total par value remains the same.
c. The price of each share will not be doubled as a result of the split. In fact, the price per share is typically reduced by half, since the number of shares has doubled. This is a market adjustment and not a direct consequence of the split itself.
d. This is the correct statement. A stockholder who previously held 100 shares will have 200 shares after a 2-for-1 stock split. The number of shares owned by each shareholder is doubled, but the value of their total holdings remains the same, assuming no other market factors affect the stock price.

If a Corporation Declares a 2-For-1 Stock Split, Which of the Following