A reverse stock split is defined as a(n):
A) increase in the number of shares outstanding.
B) company buying back existing shares of its stock on the open market.
C) company issuing additional shares to its existing shareholders.
D) decrease in the number of shares outstanding without affecting total owners' equity.
E) decrease in both the number of shares outstanding and the market price per share.

Question

Quizplus · Accepted Answer

A reverse stock split is a method used by a company to reduce the number of outstanding shares without affecting the total amount of owners' equity. For example, a 1-for-10 reverse stock split would combine 10 existing shares into one new share, reducing the number of outstanding shares by a factor of 10. This is typically done to increase the market value of the remaining shares, as well as to meet minimum share price requirements on stock exchanges.

A Reverse Stock Split Is Defined as A(n)