Effect of a stock split

Effect of stock split:

The decision of stock split, mainly effect two fields i.e. number of shares of the company and the price of each share.

As we all know, that all the companies have limited number of shares which are outstanding on the trading market. A decision of stock split by the company, increases the number of shares which are outstanding by issuing more shares to old shareholders.

As the number of shares increases, the price of the stock decreases. If a company uses a 2:1 stock split ratio, then the price of each share will be divided by half of the value. The decision of stock split is only taken up by the companies when they see their share price at a level that is either too high or much greater than the price of similar companies.

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