Which of the following does not correctly describe the effect of Mylan Company declaring and distributing a 2-for-1 common stock split?
A)Mylan's current ratio remained the same.
B)Mylan's return on equity ratio remained the same.
C)Mylan's debt-to-equity ratio remained the same.
D)Mylan's earnings per share remained the same.

Question

Quizplus · Accepted Answer

A 2-for-1 stock split means that the number of shares outstanding doubles while the value per share is halved. As a result, earnings per share and the price-to-earnings ratio would both decrease. Therefore, D is incorrect as earnings per share would not remain the same after a stock split. However, A, B, and C are correct as a stock split would not affect Mylan's current ratio, return on equity ratio, or debt-to-equity ratio.

Which of the Following Does Not Correctly Describe the Effect