Stock split and reverse split, Finance Basics

Stock Split and Reverse Split

This is whereas a block of shares is broken down into smaller units or shares hence the number of ordinary shares rises and their respective par value reduce at the stock split factor. Stock split is meant to make the shares of a company more affordable through low income investors and increase their liquidity in the market.

Illustration

ABC Company has 1000 ordinary shares of Sh.20 par value and a split of 1:4 that is one stock is split into 4. The par value is divided via 4.

1000 stocks x 4 = 4000 shares

par value = 40/5

                 = Sh.5

Ordinary share capital = 4000 x 5 = Shs.20,000

A reverse split is the opposite of stock split and involves consolidation of shares into bigger units thereby increasing the par value of the shares.  It is meant to attract high income clientele shareholders. As like incase of 20,000 shares @ Shs.20 par, they can be consolidated into 10,000 shares of Shs.40 par. That is (20,000 x ½) = 10,000 and Sh.20 = x 2 = 40/=

Posted Date: 1/31/2013 2:43:53 AM | Location : United States







Related Discussions:- Stock split and reverse split, Assignment Help, Ask Question on Stock split and reverse split, Get Answer, Expert's Help, Stock split and reverse split Discussions

Write discussion on Stock split and reverse split
Your posts are moderated
Related Questions
Asset Based Valuation - Example K and K Company Limited is planning to absorb three other companies so as to realize its sales records of Sh.500, 000 per annum.  Its accountan

Ask question #Minimu• 1.What is an Auction? E Bay is a market leader in online auction sites. Discuss SWOT for E bay using your web sources?. 2.Why so many entrepreneurs drawn to

The director of capital budgeting for a firm has identified two mutually exclusive projects, A and B, with the following expected net cash flows: Expected Net Cash Flows Year

SCENARIO You have just moved out of home and have a part-time job that pays you $18 per hour after tax (you work 20 hours a week). You also have $5000 in a savings account. You

Your daughter is a beginning freshman in high school. By the time she enters her freshman year in college, you would like to have savings accumulated to pay her tuition for her nex


A Ltd.'s share gives a return of 20% and B Ltd.'s share gives 32% return. Mr. Gotha invested 25% in A Ltd.'s share and 75% of B Ltd.'s shares. What would be the expected return of

For this assignment you are acting as a financial analyst for Apple Inc. Apple Inc. Is one of the most innovative companies worldwide. For example, in November 2012 Apple sold 3 mi

Term Structure of Interest Rates The term structure of interest rate give details the relationship between the term to maturity and interest rates and the differences between

Evaluate the probability of 10 or more customers arriving within 2 hours if on average 7 customers arrive within one hour. Customers arrive independently.