A reverse stock split is defined as:
A. an increase in the number of shares outstanding that does not affect owners' equity.
B. a firm buying back existing shares of its stock on the open market.
C. a firm selling new shares of stock on the open market.
D. a decrease in the number of shares outstanding that does not affect owner's equity.
E. a decrease in both the number of shares outstanding and the price per share.
Webster United is paying a $1.10 per share dividend today. There are 350,000 shares
outstanding with a market price of $23 per share. Ignore taxes. Before the dividend, the
company had earnings per share of $1.74. As a result of this dividend, the:
A. retained earnings will decrease by $350,000.
B. retained earnings will increase by $385,000.
C. total firm value will not change.
D. earnings per share will increase to $2.84.
E. price-earnings ratio will be 12.59.
The basic lesson of M&M Theory is that the value of a firm is dependent upon:
A. the firm's capital structure.
B. the total cash flow of the firm.
C. minimizing the marketed claims.
D. the amount of marketed claims to that firm.
E. size of the stockholders' claims.
Financial planning accomplishes which of the following for a firm?
I. determination of asset requirements
II. development of plans to contend with unexpected events
III. establishment of priorities
IV. analysis of funding options
A. I and III only