Cash and liquidity effect of stock split..

Question

can any1 help me out with the topic??

Answer 1

In a stock split, the total share capital of the company remains the same but the number of shares are increased in proportion to the split ratio. This improves the liquidity of the share as more shares are now available in the market for trading.

A split is typically an investor-friendly move by a company - specially when the price of each share goes up too much and is no longer affordable by small investors.

HUL split its share in a 1:10 ratio some time back. The face value was reduced from Rs 10 to Re 1. The number of shares increased 10 times. So if you held 100 shares of Rs 10 you ended up with 1000 shares of Re 1. The share price is currently around Rs 230. If it was a Rs 10 face value share, its equivalent valuation would have been Rs 2300.

Chances are that an investor would prefer to buy a Rs 230 share and avoid a Rs 2300 share!