The purpose (aim) of stock split is to A. Increase the number of shares B. Reduce market price per…
A stock split subdivides existing high-priced shares into a larger number of lower-par-value shares. While increasing the number of shares (A) is the mechanical action, the…
Choose your answer
The purpose (aim) of stock split is to
A. Increase the number of shares
B. Reduce market price per share
C. Arrest share price decline
D. Encourage wider public ownership
E. Reduce impact cost
Answer and explanation
Correct answer B
A stock split subdivides existing high-priced shares into a larger number of lower-par-value shares. While increasing the number of shares (A) is the mechanical action, the primary financial purpose (aim) of a stock split is to (B) reduce the market price per share into a more affordable optimal trading range and thereby (D) encourage wider retail and public ownership (B and D only).
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UGC NET Commerce