Answer (B) is correct . A reverse stock split decreases the number of shares outstanding, thereby increasing the market price per share. A reverse stock split may be desirable when a stock is selling at such a low price that management is concerned that investors will avoid the stock because it has an undesirable image.
Answer (A) is incorrect because A sale of treasury stock increases the supply of shares and could lead to a decline in market price.
Answer (C) is incorrect because A sale of preferred stock will take dollars out of investors’ hands, thereby reducing funds available to invest in common stock; therefore, market price per share of common stock will not increase.
Answer (D) is incorrect because A stock split increases the shares issued and outstanding. The market price per share is likely to decline as a result.
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