When a bank sells capital stock (equity shares) in return for cash,
A) the capital stock increases the assets side and the cash increases the liabilities side.
B) the capital stock decreases the liabilities and the cash increases the assets side.
C) the capital stock increases the net worth and the cash increases the liabilities.
D) the capital stock increases the net worth and the cash increases the assets side.

Question

Quizplus · Accepted Answer

When a bank sells capital stock, it issues equity shares in exchange for cash. This transaction increases the bank's net worth because capital stock represents ownership equity. Simultaneously, the cash received from the sale increases the bank's assets. Therefore, both the net worth and assets of the bank increase.

When a Bank Sells Capital Stock (Equity Shares) in Return