What is a stock split?

A stock split refers to the process by which a company divides its existing shares into multiple new shares, thereby increasing the total number of shares outstanding. This is typically done to make shares more affordable for investors. For example, in a 2-for-1 split, each shareholder receives an additional share for every share they own, effectively doubling the number of shares while halving the share price, so the overall value of the investment remains the same.

This strategy is often employed by companies that want to attract more investors and enhance liquidity in their stocks. It does not change the market capitalization of the company but rather makes the shares more accessible. The decision to split shares can also signal to the market that the company's stock price has been rising, and the management believes that continued investor interest may be stimulated by making the shares more affordable.

The other options reflect misunderstandings of what a stock split is. A stock split does not increase a company's debt or reduce the number of shareholders. Instead, it typically retains the same shareholder structure but adjusts the number of shares owned to maintain proportional ownership. Additionally, while a stock split can affect stock prices, it is not a direct strategy for increasing them; the primary goal is to make shares more accessible rather than to influence their