Question

A firm will often split the stock to keep the stock price within a proper trading range.

a. True
b. False

Answer 1

a. True

Step-by-step explanation:

Many times a corporation might carry out a stock split in order to prevent the price of its stock to become too expensive. E.g. when Apple's stocks get too expensive, stock splits occur, The last occasion the split stocks was 7:1, i.e. for every existing Apple stock, 6 new ones were issued.

This occurs because if the price of the stock is too high, it will be harder for small investors. Remember that the total capitalization is not affected by a stock split.