Secaucuss Co. has been in the business of manufacturing office supplies for the

Question

Secaucuss Co. has been in the business of manufacturing office supplies for the last five years. Recently, the company issued more shares to the public to raise capital for its expansion. Expanding its operations into office maintenance helped it generate additional cash inflows. Since the company expanded and issued more shares, the stockholders’ equity should also have increased. However, the stockholders’ equity went down this year. ? Which of the following statements best explains why the stockholders’ equity went down??

1.?The company employed a predatory pricing strategy to increase its market share.

?2.The company purchased some new machines to speed up its manufacturing process.

?3.The company declared a 2-for-1 stock split during the current year.

4.?The company collected revenue from services provided on an accrual basis.

Explanation / Answer

Answer : "?3.The company declared a 2-for-1 stock split during the current year."

=> The issue of 2 for 1 stock split reduces the equity value per share, so the stockholder's equity went down in the current year.

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