Stock Splits (Forward or Reverse) (SIE Exam)

FINRA
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So I took the FINRA SIE practice exam this morning (I got a 75, yay!). There was a question that asked about stock splits:

Which of the following represents the effect of a stock split?
A) The price per share of common stock increases
B) The price per share of common stock decreases
C) Each stockholder’s proportionate ownership increases
D) Each stockholder’s proportionate ownership decreases

The correct answer is B, which insinuates that the stock split is forward. I was confused by this question since it didn’t directly identify a forward or reverse stock split.

I want to confirm that when I encounter a question like this, that it can be assumed that it is a forward stock split. Thanks.

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Nice work!

Yes, unless the question states otherwise, you should assume a stock split is a forward stock split.

You might run into situations where it gives you the ratio, e.g. a 1:2 stock split or 2:1 stock split. In these cases, it could be forward or reverse as the numbers indicate!

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Sweet! Thanks a lot! My test is next week and I feel like I will be prepared in time, thanks to achievable! You guys are great!

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