ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Stock splits are generally done when the stock price of a company has risen so high that it might become an impediment to new investors. Therefore, a split is often the result of growth or the prospects of future growth, and it’s a positive signal.

Detailed explanation-2: -Stock splits may occur when a stock price is high and the company wants to make its shares more attractive to everyday investors, making them more easily tradable, thus increasing liquidity. A company may also decide to carry out a reverse stock split when its stock price is so low that it risks becoming delisted.

Detailed explanation-3: -Companies generally split stock in order to attract investors. If a company’s share prices have appreciated a great deal, many investors may not be able to afford even a single share. By reducing the price with a split, the company can make its shares easier to buy.

Detailed explanation-4: -Normally, a stock split will reduce the price per share of each share in proportion to the increase in shares. Using this example, a 2-1 split for a stock trading at $200 would halve the price to $100 and double the number of total shares outstanding.

Detailed explanation-5: -One of the most common ways in which companies reward shareholders is by splitting the stocks. This corporate action doubles the number of shares while increasing its affordability, as the price of a stock falls after a stock split.