When the board of directors approves a two for one stock split, the price for each share of stock
A)remains unchanged.
B)increases in value.
C)decreases in value.
D)is guaranteed to go up within a short period of time.
E)always drops to half of its former value.

Question

Quizplus · Accepted Answer

When a stock split is approved, the total number of shares outstanding increases while the overall value of the company remains the same. Therefore, the price per share will decrease to accommodate the increase in shares. In a two for one stock split, each shareholder will now own two shares for every one they previously owned, but each share will be worth half the value of the original share.

When the Board of Directors Approves a Two for One