A reverse stock split
A) occurs when a company wants to increase the price of its common stock because the market hasn't recognized the improvements the company has made in achieving profitability.
B) means the company exchanges fewer new shares in place of older shares.
C) eliminates any previous stock dividend.
D) is more popular in bull markets than in bear markets.

Question

Quizplus · Accepted Answer

In a reverse stock split, the company exchanges fewer new shares in place of older shares. This is done to increase the price of the stock and make it more attractive to investors. The other options are not correct: A is partly correct but does not explain the purpose of the reverse split, C is not necessarily true, and D is not a factor in determining whether a company will do a reverse split.

A Reverse Stock Split