Stock Splits definitions Flashcards
Stock Splits definitions
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Stock Split Corporate action dividing existing shares into multiple new shares, increasing share count but leaving total equity unchanged. Par Value Nominal value assigned to a share, which decreases proportionally after a stock split. Market Price Current trading value of a share, which is reduced in proportion to the split ratio after a stock split. Stockholders' Equity Total ownership value in a company, unaffected by stock splits despite changes in share count and par value. Split Ratio Numerical expression, such as 2 for 1, indicating how many new shares replace each old share in a stock split. Shares Outstanding Total number of a company's shares held by investors, which increases according to the split ratio after a stock split. Memo Entry Internal record noting changes in share structure after a stock split, since no formal journal entry is required. Common Stock Type of equity security affected by stock splits, resulting in more shares with lower par value per share. Paid-in Capital Amount invested by shareholders, which remains unchanged during a stock split. Retained Earnings Accumulated profits not distributed as dividends, unaffected by stock splits. 2 for 1 Stock Split Most common split, doubling the number of shares while halving both par value and market price per share. Journal Entry Formal accounting record not required for stock splits, as no financial accounts are directly affected. Pie Analogy Visual comparison illustrating that a stock split divides ownership into more pieces without changing the total value.
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