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Friday, July 22, 2011

How to Trade Stock Splits

A stock split increases the number of shares outstanding, which decreases the market price per share such that the before and after market capitalization of the company remains the same.

JKL Company splits its stock 2-for-1. Peter holds 1,000 shares before the split and each share priced at $20. So, Peter has $20,000 worth of stocks (1,000 * $20).
After the split, Peter will own 2,000


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