When a company exchanges 200 shares of stock worth $20 each for 100 shares worth $40 each, they are using
A) tracking stock.
B) holding stock.
C) an LBO.
D) reverse stock split.
E) split stock.

Question

Quizplus · Accepted Answer

A reverse stock split is when a company reduces the number of its outstanding shares and increases the share price proportionally. In this case, exchanging 200 shares worth $20 each for 100 shares worth $40 each is effectively a reverse stock split.

When a Company Exchanges 200 Shares of Stock Worth $20