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Starboard Corp has 750,000 authorized shares of $2 par value common stock, with 200,000 shares...

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Accounting

  1. Starboard Corp has 750,000 authorized shares of $2 par value common stock, with 200,000 shares issued and 110,000 shares outstanding with a total current market value of $150,000. You are the owner of 12% of the outstanding stock.

Which ONE statement best describes what happens when Starboard Corp executes a 3-for-1 forward stock split?

A. You will own 36% of the companys stock after the split.

B. Your ownership is worth $450,000 after the split.

C. You return your original shares to the company, and receive 39,600 new shares in exchange.

D. You receive 180,000 (i.e. 500,000 * 12% = 60,000 * 3) additional shares of stock.

E. None of the answers are correct.

2. For the below, pick the ONE most likely reason why a company might purchase its stock from its shareholders (i.e. treasury stock)?

A. To increase shareholder support for ESG initiatives

B. To execute the acquisition of a target company through an exchange of shares (and using these shares!)

C. To increase the number of authorized shares of stock

D. To reduce future income taxes on the company

E. To increase their number of outstanding shares on the market.

F. To comply with a directive from the SEC (Securities and Exchange Commission).

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