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## Balance Sheet \$type=three\$count=6\$author=hide\$comment=hide\$label=hide\$date=hide\$show=home\$s=0

Stock split is the way of increasing the number of shares. There will no change of the total value of share capital. But per share value will decrease by increasing the number of shares. Company can split shares for increasing the number of shares without increasing market capital by declaration to public.

For example : I have 10 shares stock of \$ 100 each. I have total share capital is \$ 1000. Now, company can split stock 2 for 1 each stock. It means 20 shares of 1 stock at \$ 50 per share. Now, any new investor just pay \$ 500 for buying 10 share's stock.  So, share capital will same \$ 1000. Stock split can use to attract new investors because investors will have double or triple or 4 times shares with same price. Moreover, they can make new small stocks also.

Benefits :

1. Small Investor can invest because increasing the shares in share split, price of per share will decrease, so, it will easy to small investor to invest. Just like, if you have big land, there will few investors but if you will make small plot of 50 gj, you will get lots of small investors to buy it.

2. It will also increase the marketability of specific company's share who split its share in the competition time.

Practical Example : Karur Vysya Bank board announced stock split and published it in The Hindu newspaper and also sent the information to its current shareholders.

Understanding it with this way. For example, you have to sell potato. Total value of potatos  are RS. 1,00,000

It is in 100 bags of 10 kgs with the price of Rs. 100 each. There will less customer of it who will buy it because of high per bag cost. Now. 200 bags of 10 Kgs each at the RS. 50 each bag. Now, everyone can buy but total value of bag will same and it will be Rs. 1,00,000

Category : Finance Dictionary

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Accounting Education: What is Stock Split
What is Stock Split