Accounting Dictionary

Stock Split

A stock split occurs when a company increases the total amount of shares outstanding and sends each existing shareholder a proportional amount of shares.

Let’s say a company has 100 shares of stock outstanding and you own 50 shares. 50 out of 100 shares, you own half the company and are entitled to half the profit. If the company has a 2 for 1 stock split, for every one share you did have you now have two. The total amount of shares in the company is now 200 (100 x2). The company will send you an additional 50 shares giving you a total of 100 shares. You now own 100 shares out of a total 200 shares so you still own 50% of the company and are entitled to 50% of the profit.

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