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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.