Which of the following is a reason for a firm to announce a stock split?

Question

Quizplus · Accepted Answer

A stock split is typically announced by a firm when the price of its stock has become too high, making it less attractive to investors who may not have enough funds to purchase shares at that price. By splitting the stock, the price per share is reduced, making it more affordable and accessible to a wider range of investors.

B and C are incorrect. A firm would not typically announce a stock split to reduce its dividend, which is a separate decision based on financial performance and goals. While a stock split can be an alternative to a stock repurchase, it is not necessarily more cost-effective and would not be the primary reason for announcing a split.

Which of the Following Is a Reason for a Firm