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Which of the following statements is not true about a 2-for-1 split? The market price probably will decrease
Which of the following statements is not true about a 2-for-1 split? The market price probably will decrease. Total owners' equity increases. Par value per share is reduced to half of what it was before the split. A stockholder with ten shares before the split owns twenty shares after the split.
Expert Solution
A stock split or 2 for 1 split is the process of increasing the number of outstanding shares by the company by issuing more shares to current shareholders. In this process, each stockholders receives additional share for each shares held by him.
For example, if a stockholder has 10 shares before the split, he will receive one additional share for his one share. Therefore, he will have 20 shares after the split.
But the original value or par value of each share is reduced by half after the stock split. The market price of stocks will also reduced after the stock split.
The stock splits has no effect on shareholders' equity or dividend of the company.
The answer is "Total Owners' Equity Increases".
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