What is Stock Split?

A stock split is a corporate action that increases the number of shares outstanding without changing the total value of the company. Stock splits are done to increase liquidity and make it easier for investors to buy and sell shares.

When you own one share, you have 100 voting rights (one vote per share). If your company has 2 million shares outstanding, then there are 2 million votes on what happens within their operations. With that many people involved in decision-making, things can get slow-going if everyone has similar opinions about how things should go down; so instead of having every person with an opinion have their say individually before making a decision—which would take forever—it’s often better to break up those votes into smaller groups so each person gets only one opportunity per round table discussion where they can speak freely without being interrupted by other members who may disagree with them or worse yet silence them completely!

Understand The Split Ratio

1:1 Stock Splits mean for 1 share you will get 1 extra share of the company after the split. After the split, you will have a total of 2 shares of that company if you hold 1 share before the ex-date. And also the stock price will be half after the split.

1:2 means for every 1 share you will get 2 shares.

1:10 means for every 1 share you will get 10 shares.

Why do companies do stock splits?

There are a few reasons why companies do stock splits. First and foremost, they’re an easy way to make the stock more affordable to investors. They also make it easier for investors who want to get into a company’s stock but aren’t sure how much money they can afford to invest. Finally, by increasing liquidity in their stocks (i.e., increasing the number of people who can trade them), companies can attract more investors—and therefore increase their profits!

What is the benefit of stock splits?

The benefits of stock splits are many. For example, a 2:1 stock split will increase the liquidity of your shares and allow you to sell them at a higher price. This can be helpful if you want to cash out or use those funds for other purposes (like buying more stocks).

In addition to this, increasing trading volume and market capitalization is another good reason for companies that are doing well on their own accord and not just because they’ve been given away by investors as part of some promotion scheme or other event. It’s also important because it increases investor confidence by making them think twice before investing in an upcoming IPO (initial public offering).

Finally, since companies usually have different levels of profitability based on their size—the bigger they get the more profitable they tend to become—having more shares available means there will always be someone willing to sign up if there’s something interesting going on!

Changes in a company’s market capitalization

The market capitalization of a company is simply the total value of all outstanding shares. It only affects how many shares are available for purchase by investors.

The price per share does change when there is a stock split. But this doesn’t mean that the value of your stake will decrease or increase.

So while changes in market cap might be indicative of positive developments within an industry or sector (if they’re accompanied by increased demand), they aren’t necessarily good indicators that things are going well overall for businesses within those sectors. Just because something’s going up doesn’t mean everything else must fall down.

Conclusion

We hope this article has helped to clear up some of the confusion over stock splits and why they happen. Stock splits are not magical, and they do not change what is happening at a company’s core business.