What is a financial term for dividing shares of a company into a larger number?

What is a financial term for dividing shares of a company into a larger number?

• A. Stock buyback
• B. Stock split
• C. Share issuance
• D. Dividend payout

Answer: (B)

The term that describes dividing shares of a company into a larger number is known as a stock split. When a company performs a stock split, it increases the number of its outstanding shares by issuing more shares to current shareholders, thereby reducing the price per share while maintaining the total market capitalization. This adjustment can make shares more affordable and attractive to investors, potentially increasing liquidity in the market. In contrast, stock buyback refers to a company's repurchase of its shares from the marketplace, thereby reducing the number of outstanding shares. Share issuance involves the company creating new shares to raise capital, and dividend payout is the distribution of a portion of a company's earnings to its shareholders. Each of these concepts involves different financial actions that companies may undertake but does not specifically relate to the incrementing of share counts through a split.

The term that describes dividing shares of a company into a larger number is known as a stock split. When a company performs a stock split, it increases the number of its outstanding shares by issuing more shares to current shareholders, thereby reducing the price per share while maintaining the total market capitalization. This adjustment can make shares more affordable and attractive to investors, potentially increasing liquidity in the market.

In contrast, stock buyback refers to a company's repurchase of its shares from the marketplace, thereby reducing the number of outstanding shares. Share issuance involves the company creating new shares to raise capital, and dividend payout is the distribution of a portion of a company's earnings to its shareholders. Each of these concepts involves different financial actions that companies may undertake but does not specifically relate to the incrementing of share counts through a split.