Desde Investopedia

TERM OF THE DAY

Stock Split A corporate action in which a company divides its existing shares into multiple shares. Although the number of shares outstanding increases by a specific multiple, the total dollar value of the shares remains the same compared to pre-split amounts, because the split did not add any real value. The most common split ratios are 2-for-1 or 3-for-1, which means that the stockholder will have two or three shares for every share held earlier. Also known as a "forward stock split." In the U.K., a stock split is referred to as a "scrip issue," "bonus issue," "capitalization issue" or "free issue."

Breaking it Down: For example, assume that XYZ Corp. has 20 million shares outstanding and the shares are trading at $100, which would give it a $2 billion market capitalization.... Read More