Question : A stock split involves:
Option 1: Issuing additional shares to existing shareholders
Option 2: Combining multiple stocks into a single share
Option 3: Converting stocks into bonds
Option 4: Trading stocks on multiple exchanges
Correct Answer:
Issuing additional shares to existing shareholders
Solution : The correct answer is (a) Issuing additional shares to existing shareholders.
A stock split involves the issuing of additional shares to existing shareholders of a company. In a stock split, the total number of outstanding shares of a company is increased, and the share price is adjusted accordingly.The purpose of a stock split is to increase the liquidity and affordability of the company's shares. By increasing the number of shares, the price per share decreases, making the shares more accessible to a broader range of investors. The overall market capitalization of the company remains the same before and after the stock split.
