SIE Exam Question 109: Answer and Explanation

Question: 109

Which of the following terms is a maneuver used by a company that increases the number of shares outstanding by exchanging a specified number of new shares of stock for each outstanding share?

• A. Stock dividend
• B. Stock split
• C. Stock valuation
• D. Stock buyback

Correct Answer: B

Explanation:

A stock split is a maneuver used by a company that increases the number of shares outstanding by exchanging a specified number of new shares of stock for each outstanding share. A stock dividend is a distribution made by a company to its shareholders of additional shares of stock. Stock valuation is the process of determining the value of the shares of a company's stock. When a company uses its capital to repurchase shares it has previously issued, this is called a stock buyback.