Question

The purpose of stock split is:

Select one:

a.

To incentivise the shareholders

b.

To reduce the shareholders base 

c.

None of the option

d.

Enhance the trading activity of stock

​

Answer 1

The purpose of stock split is to  enhance the trading activity of stock

• Stock  Splitting is the situation where an enterprise allocates the preferred stock's ongoing shares into considerable fresh ones.
• The splitting is done to naturally increase the active stock's liquidity as well as its trading activity.
• M​arket capitalization does not change barely if the sufficient number of outstanding shares rises and the reasonable price per share decreases.  
• As a consequence, stock splits help make stocks more competitive for more private investors and improve marketability and market liquidity.