Final answer:
A reverse split reduces the number of shares outstanding but does not affect a firm's total equity. It involves combining multiple old shares into one new share, and decisions on such actions are typically made by the firm's board of directors.Correct option is c.
Step-by-step explanation:
The action that reduces the number of shares outstanding without changing a firm's total equity is known as a reverse split (or reverse stock split). In a reverse split, a firm combines a specified number of shares into one new share. For instance, in a 1-for-10 reverse split, 10 shares at $1 each would be combined to create one $10 share. However, the overall equity of the firm remains unchanged. The shareholder's percentage of ownership in the firm does not change either, as the reverse split affects all shares uniformly.
A reverse split is often done to increase the market price of a stock to meet exchange listing requirements or to dissuade short-term speculators. This contrasts with a stock split, which increases the number of shares outstanding and decreases the price per share but also leaves equity unchanged. The other options provided, such as distribution, liquidation, and redemption, will affect a company's total equity or the number of shares outstanding in different ways.
The decisions about when a firm will issue stock, or pay dividends, or re-invest profits are usually made by the firm's board of directors, particularly in public companies. In private firms, the owners have more direct input into these decisions.