1. What Is A Stock Split?

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, the total dollar value of the shares remains the same compared to pre-split amounts.

2. How Does The Calculator Work?

The calculator uses the stock split formula:

Where:

• \( \text{Old Price} \) — The pre-split price per share
• \( \text{Ratio} \) — The split ratio (e.g., 2:1 split would use ratio 2)

Explanation: The formula calculates the new price per share after a stock split by dividing the old price by the split ratio.

3. Importance Of Stock Split Calculation

Details: Understanding stock splits is important for investors to accurately track their investments, calculate their position values, and make informed decisions about buying or selling shares.

4. Using The Calculator

Tips: Enter the old price per share and the split ratio. Both values must be positive numbers greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: Why do companies perform stock splits?
A: Companies typically perform stock splits to make shares more affordable to small investors, increase liquidity, and potentially attract more investors.

Q2: Does a stock split change the company's market capitalization?
A: No, a stock split does not change the company's market capitalization. It only increases the number of shares while proportionally decreasing the price per share.

Q3: What are common stock split ratios?
A: Common split ratios include 2:1, 3:1, 3:2, and occasionally higher ratios like 5:1 or 10:1.

Q4: How does a stock split affect my investment?
A: Your total investment value remains the same immediately after a split, but you now own more shares at a lower price per share.

Q5: Are there different types of stock splits?
A: Yes, the most common are forward splits (increasing shares) and reverse splits (decreasing shares), which work in the opposite direction.