Stock splits:
A)increase the number of shares outstanding.
B)decrease the common stock account by the amount of the split.
C)reduce retained earnings.
D)increase the total wealth of stockholders.
E)none of the above.

Question

Quizplus · Accepted Answer

Stock splits increase the number of shares outstanding, which means that each existing shareholder will now have more shares, but the total value of their investment remains the same. For example, in a 2-for-1 stock split, each shareholder receives two shares for every one share they previously held, effectively doubling the number of shares outstanding. This does not affect the common stock account or retained earnings, and does not increase the total wealth of stockholders (although it can make the shares more affordable to new investors).

Stock Splits