Question

14) The act of a corporation to call in its shares and issue one new share in the place of more than one share previously outstanding is a. A) Reverse share split B) Share dividend. C) Cash dividend. D) Liquidating dividend E) Share split.

Answer 1

A reverse share split is the act of a corporation calling in its shares and issuing one new share in place of multiple shares previously outstanding. This reduces the number of shares but increases the value per share proportionally.

Step-by-step explanation:

The act of a corporation to call in its shares and issue one new share in the place of more than one share previously outstanding is known as a reverse share split.

In a reverse share split, the number of outstanding shares is reduced, but the value per share increases proportionally. This is often done by companies to meet stock exchange requirements or to boost the stock price.

For example, if a company has 100 shares outstanding and decides to do a 1-for-10 reverse share split, it will call in those 100 shares and issue 10 new shares in their place. This means that each new share will represent 10 old shares, resulting in a higher share price.