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
Advantage and Disadvantage of Sole Proprietorship Advantage of Sole Proprietorship High supervision of employees Income motivate owner Sole trade mostly ski

Disadvantages of Floatation of New Shares 1. The cost of getting a quotation is high, mainly when a new issue of shares is completed and the company is small. It means that su

Acceptance Rule of Payback Period or PBP By using PBP method a company such will accept all those ventures whose payback period is less than to set via the management and will

how can I get?

Profitability in relation to investment - Profitability Ratio a) Return on Investment (ROI) or return on total asset (ROTA) = (Net profit/ Total asset) x 100 The ratio i

calc the nimonal(annual percentagerete)interest rate if the iffective interest rate earned on an investment is 16.08%/Unum but interest is calculated at the end of each month

Types of jobbers in Stock Market There are three kinds of jobbers as: a) Bulls A jobber buys shares while prices are down and hold them in anticipation such t

Role of Stock Exchange in Economic Development The Roles of Stock Exchange in Economic Development are as follow: 1. Raising Capital for Businesses The Stock Exchange

evaluate the source of finance for a business project

Question 1: Consider a 5-year $10,000 endowment assurance issued to a select life aged 30 under the following bonus schemes:- (a) Simple reversionary bonuses of 5% p.a., 6%i