How to Figure a Stock Split

Save
Par value and outstanding shares are on the balance sheet.
Par value and outstanding shares are on the balance sheet. (Image: balance sheet image by Darko Draskovic from Fotolia.com)

Corporations split stocks to control the stock price when the stock price increases too rapidly. A stock split gives existing owners additional stock based on the new stock-splitting ratio. Splitting stocks does not change the amount of value that the individual stockholder owns. In addition, the stockholder's equity section of the corporation's balance sheet does not change. The only changes that occur are an increase in outstanding shares and a proportional decrease in par value.

Divide the ratio to put it in terms of one stock. For example, there is a 3:2 stock split; therefore, it equals 3 / 2, or 1.5.

Multiply the factor determined in Step 1 by the current number of shares outstanding. For example, if there are 100,000 outstanding shares, you multiply that by 1.5: 100,000 x 1.5 = 150,000. This is the number of shares outstanding after the split.

Divide the par value by the factor determined in Step 1. For example, if the par value is $15, divide $15 by 1.5: 15 / 1.5 = 10. The new par value of the stock is $10.

Related Searches

References

Promoted By Zergnet

Comments

You May Also Like

Related Searches

Check It Out

4 Credit Myths That Are Absolutely False

M
Is DIY in your DNA? Become part of our maker community.
Submit Your Work!