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Stock Split Formula:
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A stock split is a corporate action where 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.
The calculator uses the stock split formula:
Where:
Explanation: The formula calculates the new price per share after a stock split by dividing the original price by the split ratio.
Details: Calculating the adjusted price is crucial for investors to understand the true value of their investments after a stock split and to make accurate comparisons of historical stock prices.
Tips: Enter the original stock price in USD and the split ratio. Both values must be positive numbers greater than zero.
Q1: What is a typical stock split ratio?
A: Common split ratios are 2:1, 3:1, or 3:2, meaning for every share owned before the split, you'll have 2, 3, or 1.5 shares respectively after the split.
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 outstanding while decreasing the price per share proportionally.
Q3: 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.
Q4: How does a stock split affect my investment?
A: The total value of your investment remains the same immediately after a split, but you now own more shares at a lower price per share.
Q5: What is a reverse stock split?
A: A reverse stock split reduces the number of shares and increases the share price proportionally, often used to meet exchange listing requirements.