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share spilt

Ca Natbar Lal Jha (CA) (65 Points)

18 August 2008

sir i want to know the reason for sharespilt and what will be its effect on market price.

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4 Replies

Ca Natbar Lal Jha (CA) (65 Points)
Replied 18 August 2008

sir i want to know the definition of midcap,smallcap & large cap.

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CA Kamal Jhawar (service) (46 Points)
Replied 18 August 2008

A stock split or stock divide increases the number of shares in a public company. The price is adjusted such that the before and after market capitalization of the company remains the same and dilution does not occur. Options and warrants are included Take, for example, a company with 100 shares of stock priced at $50 per share. The market capitalization is 100 × $50, or $5000. The company splits its stock 2-for-1. There are now 200 shares of stock and each shareholder holds twice as many shares. The price of each share is adjusted to $25. The market capitalization is 200 × $25 = $5000, the same as before the split. is often claimed that stock splits, in and of themselves, lead to higher stock prices; research, however, does not bear this out. What is true is that stock splits are usually initiated after a large run up in share price. Momentum investing would suggest that such a trend would continue regardless of the stock split. In any case, stock splits do increase the liquidity of a stock; there are more buyers and sellers for 10 shares at $10 than 1 share at $100. Other effects could be psychological. If many investors believe that a stock split will result in an increased share price and purchase the stock the share price will tend to increase. Others contend that the management of a company, by initiating a stock split, is implicitly signaling its confidence in the future prospects of the company.

CA Kamal Jhawar (service) (46 Points)
Replied 18 August 2008

LARGE CAP/........ Cap is short for capitalisation which is a measure by which we can classify a company's size. Big/large caps are companies which have a market cap between 10-200 billion dollars. Mid caps range from 2 billion to 10 billion dollars. These might not be industry leaders but are well on their way to becoming one. Small caps are typically new or relatively young companies and have a market cap between 300 million to 2 billion dollars.

sandhya (Business Analyst) (28 Points)
Replied 13 September 2008

Originally posted by : CA Kamal Jhawar
"	A stock split or stock divide increases the number of shares in a public company. The price is adjusted such that the before and after market capitalization of the company remains the same and dilution does not occur. Options and warrants are included Take, for example, a company with 100 shares of stock priced at $50 per share. The market capitalization is 100 × $50, or $5000. The company splits its stock 2-for-1. There are now 200 shares of stock and each shareholder holds twice as many shares. The price of each share is adjusted to $25. The market capitalization is 200 × $25 = $5000, the same as before the split. is often claimed that stock splits, in and of themselves, lead to higher stock prices; research, however, does not bear this out. What is true is that stock splits are usually initiated after a large run up in share price. Momentum investing would suggest that such a trend would continue regardless of the stock split. In any case, stock splits do increase the liquidity of a stock; there are more buyers and sellers for 10 shares at $10 than 1 share at $100. Other effects could be psychological. If many investors believe that a stock split will result in an increased share price and purchase the stock the share price will tend to increase. Others contend that the management of a company, by initiating a stock split, is implicitly signaling its confidence in the future prospects of the company.	"

Hi sir,

Can you please explain me about the stock split . How it will effect in balancesheet for Common stock,retained earning and Additional Paid in capital.What is the reason behind if it effects to these 3 elements.

Please explain me about 1. Stock Split and 2. Reverse stock split both the cases.