Question

Which of the following statements is/are correct? Question 2 Not yet answered Marked out of 100 Flag Share buy-backs decrease the number of shares and total equity remains unchanged. Share splits increase the number of shares and total equity remains unchanged. (ii) Bonus share issues decrease cash and increase total equity. question Select one: O a. (i) and (ii) O b. (H) O c. O d. O e.) and (i)

Answer 1

Ans- 2

c. (ii)

Explanation:

Share splits increase the number of shares and total equity remains unchanged because share splits doesn't result in any inflow to the company. It is just used to reduce the par value per share and no. of shares gets increased without any change in total equity of the company. So Statement (ii) is correct. Share buybacks decrease the number of shares but total equity doesn't remain unchanged, it is also decreased. So (i) statement is incorrect. Bonus shares issues doesn't decrease cash and doesn't increase total equity because accumulated profits i.e. retained earnings are used to issue bonus shares. So (iii) statement is also incorrect.

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