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Username: PrettyWoman

Rating:
Guru Stars

Asked to: Heng Kim

Date Created: 03 Sep 2018
Category 28
Tag Financial
Question What is a 'Stock Split'?
Advice from Guru
Hello PrettyWoman,

A stock split is a corporate action in which a company divides its existing shares into multiple shares to boost the liquidity of the shares. Although the number of shares outstanding increases by a specific multiple, the total dollar value of the shares remains the same compared to pre-split amounts, because the split does not add any real value. The most common split ratios are 2-for-1 or 3-for-1, which means that the stockholder will have two or three shares, respectively, for every share held earlier.

A stock split is also known as a forward stock split. In the UK, a stock split is referred to as a scrip issue, bonus issue, capitalization issue, or free issue.

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