Financial Terms / stock split

# What is a Stock Split?

Stock splits are a great way for companies to make their stocks more accessible and affordable for investors. Common split ratios are 2-for-1 and 3-for-1, which will increase the company's liquidity.

## Formula

``New Price = Original Price / Split Ratio``

## How do I calculate the stock split?

`It is important for investors to understand how to calculate stock splits as they can play an important role in the liquidity of a stock. The most common type of split is a 2-for-1 or 3-for-1, where each shareholder receives an additional share, for example, for every two shares they own. To calculate the new stock price after a split, one can use the following formula: `New Price = Original Price / Split Ratio`. For example, if the original price of a stock is \$20 and the split ratio is 2-for-1, the new price of the stock would be \$10. Tools such as Sourcetable can be used to calculate stock splits.`

## What is a stock split?

`A stock split is when a company issues more shares to boost liquidity. This can be done by a 2-for-1 or 3-for-1 split ratio.`

## Why do companies do stock splits?

`Stock splits are done to make the stock more affordable and maintain its value.`

## What is a reverse stock split?

`A reverse stock split is the opposite of a stock split. It involves reducing the number of shares of a company.`

## Key Points

How do I calculate stock split?
`New Price = Original Price / Split Ratio`
Stock Split
A stock split is when a company increases the number of shares outstanding to make the stock more accessible to investors. It is most commonly done in a 2-for-1 or 3-for-1 ratio, meaning for every share held before the split, each shareholder will have two or three shares after the split.
Affordability
A company may choose to split its stock in order to make the stock more affordable, thus allowing more investors to purchase the stock. Splitting the stock can also make it more appealing to investors.
Frequency
A company can split its stock as many times as it wants, allowing the stock to become even more accessible to investors.