Question

A 3 for 1 common stock split will increase total stockholders' equity but reduce the par or stated value per share of common stock

a) True
b) False

Answer 1

A 3 for 1 common stock split does not increase total stockholders' equity but reduces the par or stated value per share of common stock.

Step-by-step explanation:

A 3 for 1 common stock split will not increase total stockholders' equity but it will reduce the par or stated value per share of common stock. Therefore, the correct answer is b) False.

When a company performs a stock split, it increases the number of shares outstanding while proportionally decreasing the price per share. The total stockholders' equity remains the same because the split does not involve any additional capital or assets being injected into the company. However, the par value per share is reduced because the split results in a higher number of shares with a lower individual value.