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Answer Posted / venkataseshaiah
Stock split Occurs when a firm issues new shares of stock
but in turn lowers the current market price of its
stock to a level that is proportionate to pre-split prices.
For example, if IBM trades at $100 before a 2-for-1
split, after the split it will trade at $50 and holders of
the stock will have twice as many shares than they had
before the split.
Split
Sometimes, companies split their outstanding shares into a
larger number of shares. If a company with 1
million shares did a two-for-one split, the company would
have 2 million shares. An investor with 100 shares
before the split would hold 200 shares after the split. The
investor's percentage of equity in the company
remains the same, and the price of the stock he owns is one-
half the price of the stock on the day prior to the
split
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