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Purpose and Benefits of a Stock Split

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What is the purpose of a stock split?

What are some benefits of a stock split for a company?

What are some benefits for an investor?

What is the effect to the market value of the stock?

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Solution Summary

Provides a discussion about stock splits and their benefits.

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Dear student,

Meaning of stock split:

Stock split means increase in the number of shares of the company without altering the amount of share capital by issuing more shares to the current shareholders. Therefore, market capitalization is same both before and after stock split. Ex. One share, face value of $10 can be split into two shares of $ 5 each. Stock split will change the number of shares mentioned in the Balance sheet.

What is the purpose of stock split?

Following are the purposes of stock split:

1. If the share price is high and is not affordable to the small investors to buy the shares of the company, then company will split the ...

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