Financial Terms: Know What is Stock Split, Benefits, and More

What is Stock Split: A stock split occurs when a company divides its existing shares into multiple shares, thereby increasing the number of outstanding shares while decreasing the price per share. Stock splits do not affect the company's total market value; rather, they make individual shares more affordable to investors.

How Investors Get Benefit From Stock Split?

When shares split, the company gets overvalued. Their value becomes very high. So, the common investors are not able to invest in the shares and their selling and buying on the exchange becomes less because they are of higher price. When a company splits its stock, the investor gets the benefit. For example, you bought a share for Rs.100 with the company share but the company divided it into 1:10, which means the company divided 10 shares of Rs.100. So, all of them are worth Rs.10. So, instead of 1, you will get 10 shares of the company. Now, when the price of those Rs.10 will increase, then the investor will get the benefit, the liquidity will increase, and you will get profit.