Which of the following statements concerning stock splits is true?
A) Stock splits represent unrealized gains in the company and should increase the stock's value.
B) Stock splits represent unrealized losses in the company and should decrease the stock's value.
C) Stock splits add nothing of value to a company and should not affect market value.
D) Stock splits subtract value from a company and should negatively affect market value.

Question

Quizplus · Accepted Answer

Stock splits are purely cosmetic and do not add intrinsic value to a company. They increase the number of shares outstanding while proportionally decreasing the price per share, leaving the market capitalization unchanged.

Which of the Following Statements Concerning Stock Splits Is True