If a firm splits its common stock three for one at year-end, then the return on common stockholders' equity will be lower than what it would have been without the stock split.

Question

Quizplus · Accepted Answer

A stock split does not affect the return on common stockholders' equity because it does not change the company's total equity or earnings; it merely increases the number of shares outstanding while proportionally decreasing the stock price.

If a Firm Splits Its Common Stock Three for One