A Inc. owns 80% of B's outstanding voting shares. Under which of the following scenarios would A's ownership percentage of B change?
A)B Inc. announces a 2-for-1 stock split to all its common shareholders.
B)B issues an additional 10,000 voting shares; A acquires 8,000 shares of the new issue.
C) B issues an additional 10,000 voting shares; A acquires 6,400 shares of the new issue.
D) B retires 20,000 voting share, and in doing so, buy back 16,000 shares from A.

Question

A Inc. owns 80% of B's outstanding voting shares. Under which of the following scenarios would A's ownership percentage of B change? 
A)B Inc. announces a 2-for-1 stock split to all its common shareholders.
B)B issues an additional 10,000 voting shares; A acquires 8,000 shares of the new issue.
C) B issues an additional 10,000 voting shares; A acquires 6,400 shares of the new issue.
D) B retires 20,000 voting share, and in doing so, buy back 16,000 shares from A.

Quizplus · Accepted Answer

A's ownership percentage of B would change only if there is an increase in the number of outstanding voting shares or if A sells some of its shares. In scenario A, a stock split would not change the percentage ownership as the proportion of shares held by A remains the same. In scenario B, A acquires 80% of the new issue, maintaining its ownership percentage. In scenario D, the total number of outstanding shares decreases, but A's ownership percentage remains at 80%. However, in scenario C, A acquires only 64% of the new issue, which would decrease its ownership percentage.

A Inc Owns 80% of B's Outstanding Voting Shares