Question

Widget Co has a market capitalization of $ 100M. It does a 5-for-1 stock split. It then does a 1- for-25 reverse stock split. Finally, it does a 35-for-1 stock split. Nothing else changes. What’s the new market cap?

Answer 1

Answer: $100M

Explanation:

This is a bit of a trick question but when you come into contact with such questions remember this, stock splits do not change the total Market Capitalization. Market Cap is the total cash value of the company's stock in the market. A split would increase the number of shares outstanding but the market cap will remain the same because the shares will decrease in value.