Skiptrace Software Inc. is positioned ideally in the manufacturing and distribution sectors. It is the only company providing highly developed inventory tracking software. The company does a brisk business with companies such as Home Hardware and Roots. Skiptrace Software Inc.'s success has made the company a prime target for a takeover. Against the wishes of Skiptrace Software Inc.'s board of directors, an investment group is attempting to buy 55 percent of Skiptrace Software Inc.'s outstanding shares. Board members are convinced that the investment group would sell off the most desirable pieces of the business and leave little of value.
At the most recent board meeting, several suggestions were advanced to fight off the hostile takeover bid. One suggestion was to increase the shares outstanding by splitting the company's shares two for one.
Required
As a significant shareholder of Skiptrace Software Inc., write a short memo to the board advising how a stock split would affect the investor group's attempt to take over Skiptrace Software Inc. Include in your memo a discussion of the effect that the stock split would have on assets, liabilities, and total shareholders' equity; that is, the split's effect on the size of the corporation.