Stock splits can be used to:
A)adjust the market price of a stock such that it falls within a preferred trading range.
B)decrease the excess cash held by a firm thereby lowering agency costs.
C)increase both the number of shares outstanding and the market price per share.
D)increase the total equity of a firm.
E)adjust the debt-equity ratio.

Question

Quizplus · Accepted Answer

Stock splits are often used to adjust the market price of a stock such that it falls within a preferred trading range. This can make the stock more attractive to investors and increase trading volume. Splitting a stock does not change the total value or equity of the firm, only the number of shares outstanding and the market price per share. It also does not affect the debt-equity ratio. Therefore, options B, C, D, and E are incorrect.

Stock Splits Can Be Used To