B. Z Corporation has 1,000 shares of K20 par value common stock outstanding. The company is considering a 4 for 1 stock split. How will this affect the shareholders' equity accounts?
B. Z Corporation has 1,000 shares of K20 par value common stock outstanding. The company is considering a 4 for 1 stock split. How will this affect the shareholders' equity accounts?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:B. Z Corporation has 1,000 shares of K20 par value common stock outstanding. The
company is considering a 4 for 1 stock split. How will this affect the shareholders'
equity accounts?
Expert Solution
Step 1
The stock split is a component of financial restructuring in which the corporation makes decisions regarding the stock split, capital reduction, and capital decomposition. In a stock split, the firm divides the total value of each share, resulting in a rise in the number of shares and a fall in the value of each share. A stock split occurs when a corporation raises the number of outstanding shares in order to improve the stock's liquidity. Although the number of outstanding shares rises, the company's total market capitalization remains same since the price of each share splits as well.
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