A Stock Split is a corporate action in which a company increases the number of shares outstanding by issuing more shares to existing shareholders. This is typically done to make the stock more affordable for individual investors and to increase the liquidity of the stock.For example, a company may decide to do a 2-for-1 stock split. This means that for every 1 share of stock that an investor owns, they will receive an additional share. So, if an investor owns 100 shares of a stock before the split, they would own 200 shares after the split. The value of the investor's holding remains the same, but the number of shares increases.The stock price is also adjusted accordingly, so that the market value of the shares remains the same. In the example of a 2-for-1 stock split, the stock price would be halved. So, if a stock was trading at $100 before the split, it would trade at $50 after the split.It is important to note that a stock split does not change the underlying value of the company and it does not have any direct impact on the company's financials. It is just a change in the number of shares outstanding and the stock price.Example:A company XYZ Inc's stock is trading at $200 and the company decides to do a 2-for-1 stock split. After the split, the stock price would be halved to $100 and the number of shares outstanding would be doubled. If an investor owned 100 shares of the stock before the split, they would own 200 shares after the split, and the value of their holding would remain the same at $20,000.
