stock-split

Vocabulary Word

Definition

Imagine a company as a pizza divided into slices. When a 'stock-split' happens, it's like each slice is divided into smaller pieces, but you still have the same amount of pizza. It increases the shares of a company without affecting the total value.

Examples in Different Contexts

For investor impact, a stock split is typically viewed positively, as it can indicate company growth and make shares appear more attractive due to the lower price. An investor might explain, 'I see the stock split as a sign of confidence from the company’s management in its future prospects.'

Practice Scenarios

Academics

Scenario:

The XYZ company's shares are expensive and its shareholders are mostly institutional investors. It might inhibit diversity among shareholders.

Response:

A potential solution could be a stock-split. It can increase the number of shareholders by reducing the price of individual shares.

Business

Scenario:

The price of ABC company's shares are soaring. It's making them less accessible for smaller investors.

Response:

Then they should consider a stock-split to lower the share price and make it more affordable.