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A corporate action which splits the existing shares of a particular face value into smaller denominations so that the number of shares increase. Stock split increases the liquidity of the stock as the same share which was priced higher will be offered at cheaper rates.

 

For example, If Company X announces a stock split in the ratio 2 :1 , each stockholder will receive an additional share for each share held, however, the value of each share is reduced by half. The value of two shares now will be equal the original value of one share before the split.

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