Question

A reverse stock split is sometimes used as a means of:

decreasing the market value per share of stock.

decreasing the liquidity of a stock.

raising cash from current stockholders.

keeping a firm's stock eligible for trading on a stock exchange.

increasing the number of stockholders.

Answer 1

Correct option is "keeping a firm's stock eligible for trading on a stock exchange"
In some exchanges, stocks with too low prices are prohibited from being traded. Reverse split increases the per share price, and this keeps the stock of the company to trade on an exchange. This increases liquidity.
Reverse stock split is not a corporate action that would increase the number of stockholders or raise cash from current stockholders. It also does not decrease the per share market value of a stock.